Trust deed variations: when and why you need one
A trust deed variation (also called a deed of amendment) is a formal legal document that changes the terms of an existing trust deed. Variations are common and necessary because trust deeds, once established, may not keep pace with changes in legislation, case law, the beneficiaries’ circumstances, or the trustee’s needs.
Common reasons for a deed variation include updating the income definition to reflect the Bamford decision, excluding foreign persons from the class of beneficiaries to avoid surcharge duties, extending the vesting date, adding or removing beneficiaries, expanding or restricting the trustee’s investment powers, and updating the deed to comply with current superannuation legislation (for SMSF deeds).
Before varying a trust deed, the trustee must confirm that the deed actually permits variation. Most modern deeds include a variation power, but some older deeds do not, or include a variation power that is subject to conditions (for example, requiring the consent of all beneficiaries, or prohibiting variations that affect vested interests). Without a variation power, the usual route is a court application (in rare cases all beneficiaries, if adult and identifiable, can consent to the change).
A deed of variation must be properly executed to be effective. This typically means it must be signed by the trustee (and in some cases, by the appointor or all beneficiaries), it must clearly identify the trust and the deed being varied, and it must precisely specify which clauses are being amended and the new wording. Ambiguous or poorly drafted variations can create more problems than they solve.
At CoSec Partners, deed variations are drafted and signed off by Key Legal, an independent external law firm, before being issued. We handle Bamford amendments, foreign persons exclusions, vesting date extensions, and general deed amendments. Each trust deed variation costs $418 including GST and includes the legal sign-off.
Frequently asked questions
What if the trust deed has no variation power?
Then the terms cannot be changed by deed, and an application to the court is the usual route (in rare cases all beneficiaries, if adult and identifiable, can consent to the change). This is a real problem with some older deeds, and it is the reason the variation clause is read before any amendment work is quoted or commenced.
Can several changes be made in one deed of variation?
Yes, and it is usually more efficient to do so. A pre-2010 family trust deed frequently needs a Bamford income definition, a foreign persons exclusion, and a review of the vesting provisions, and those can be prepared as a coordinated package rather than three separate exercises.
Who needs to sign a deed of variation?
The trustee always, and depending on the deed, the appointor or in some cases the beneficiaries. The execution requirements come from the variation clause itself. A variation signed by the wrong parties is at risk of being ineffective, which is worse than not having varied at all.
This article is general information only and does not constitute legal, financial, or tax advice. While we endeavour to keep content accurate and current, laws and regulations change frequently. For advice specific to your circumstances, please consult a qualified professional adviser. CoSec Partners Pty Ltd accepts no liability for actions taken based on this content.