North Sydney Commercial Lawyers

Trusts in estate planning – how do you extend the vesting date?Print This Post

Trusts in estate planning – how do you extend the vesting date?

The vesting date of a trust can be extended in three ways:

I By exercising a power in the terms of the trust deed;

II By obtaining the consent of the beneficiaries; or

III By obtaining an order of the court (a method of last resort).

As to “I” above, a vesting date may be extended where there is an express term in the trust deed which provides for such an extension provided that the rule against perpetuities is not offended.

But what should you do if there is no such term in the trust deed (so “I” is not available) and the beneficiaries of the trust are not readily ascertainable? Some may not have even been borne (so “II” is not available)!

Where beneficiaries are not readily ascertainable, you can apply to the Courts and they have an inherent jurisdiction to authroise a power to vary in circumstances where the absence of power would thwart the intention of the settlor: Tickle –v – Tickle (1987) 10 NSWLR 581.

Independent of the Court’s inherent jurisdiction, s 81 of the Trustee Act 1925 (NSW) provides that the Court is authorised to vary a trust instrument where it is expedient to do so. The expediency test has been interpreted broadly and was summarised in Riddle – v- Riddle (1952) 85 CLR 202 where Williams J. held that “expedient” means advantageous, desirable and suitable to the circumstances of the case.

What is the ATO’s view on extensions of the vesting date?

There is always some concern as to whether the extension of the vesting date of a trust would constitute a resettlement and trigger a CGT liability by virtue of CGT events E1 or E2 occurring. The key message for stakeholders after Clark’s case and the Commissioner’s view in TD 2012/21 is that in most cases an extension of the vesting date would be unlikely to cause CGT events E1 or E2.