This article provides an explanation as to what the "Vesting date" of a Trust is; whether this date can be extended; and whether NowInfinity allows for perpetual or "never-ending" Trusts.
What is the purpose of the Vesting service on the NowInfinity platform?
Can the Vesting Date of a Trust be extended?
Does NowInfinity allow for perpetual, or "never-ending", Trusts?
What is the "Vesting Date"?
The Vesting Date is the date, or event, at which the Trust will end i.e. where the beneficial interests in the Trust assets become fixed.
The terms of the Trust Deed may state that, on the Vesting Date, the Trustee is to end the Trust by distributing Trust assets to eligible Beneficiaries. If a Vesting Date occurs without the Trustee exercising its discretion, most deeds will provide that Trust assets are distributed automatically to the "primary" or "designated" Beneficiaries, or that the Trustee will continue to hold the Trust assets from this date for specified Beneficiaries (the underlying Trust relationship may continue although the Trustee's duties will change).
Check the Trust deed to ensure you are aware of the Vesting Date so as to avoid breaching the "rule against perpetuities".
What is the purpose of the Vesting service on the NowInfinity platform?
The Vesting service is intended to be used as and when the trustee is winding up the trust and not, for example, to appoint a vesting date well into the future.
Can the Vesting Date of a Trust be extended?
All States and Territories (except South Australia) require the Trust to Vest within 80 years i.e. the Perpetuity Period.
Some Trust Deeds may contain the power to extend the Vesting Date (in which case you will require a Deed of Variation to make this amendment). If there is no such power, then you may amend the Vesting Date with approval from the relevant State or Territory Supreme Court prior to the Trust Vesting. However, if the Vesting Date has passed, you are no longer able to extend the Trust's term (noting the decision [2021] VSC 154 which contradicts the ATO's views in TR 2018/6, it would be prudent to ensure that the Vesting Date is not extended after the Trust has already Vested).
Points to note:
- the Vesting Date cannot be extended to a date that is more than 80 years from the date the Trust commenced (except in South Australia where the rule against perpetuities has been abolished).
- to extend the Vesting Date, the Trust deed must allow for this - you must ensure the terms of the Trust deed are complied with, in the event that you change the Vesting Date (whether by an express power to bring forward the Vesting Date where the default Vesting Date is 80 years or by varying the deed)
- the provisions of the Trust Deed will dictate whether or not Vesting the Trust will give rise to income tax implications such as CGT consequences, resettlement, stamp duty
Does NowInfinity allow for perpetual, or "never-ending", Trusts?
The NowInfinity Deed automatically adjusts for perpetual or "never-ending" Trusts for Deeds set up in South Australia (i.e. the only jurisdiction in Australia that has abolished the perpetuity period of 80 years).
For clients wanting to set up Trusts outside of South Australia (i.e. in States limited by this perpetuity period restriction), our Partnered Legal Provider may be able to assist with specialist legal structuring.
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