01 Jul 2016
Family Trusts - How to Avoid the Expiration Date

Family Trusts - How to Avoid the Expiration Date

Family Trusts - How to Avoid the Expiration Date
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Guid,Tips,Selling,Auction real estate agents

With family trusts in fact having an 80-year lifespan, what are your options for creating a family trust without an expiration date? We explore the options below.

The growing anxiety in the investment world and professional circles about the family trust expiration issue has seen an increasing trend over the past few years for people to establish their family trusts in South Australia where no such rule of perpetuities applies.

So, should we all now be establishing any new family trust in SA to avoid this issue and so that there’s no expiration date for the family trust, or is there some simple way to amend the trust documentation to extend its life?

The law is clear on the second question and it isn’t possible to extend the perpetuity date on an existing trust by varying the trust documentation.

There are two professional streams of opinion in the marketplace about the ability and effectiveness of setting up trusts in SA to circumvent this issue.

The first body of professional opinion is that, provided the trust documentation states that the laws of South Australia apply to the trust and the trustee is, say, a company which has a registered office in SA, then this will see the establishment of a legal trust in SA which can then be utilised throughout the country without any concern about its expiration.

The contrary opinions are those tax and trust advisers who maintain that setting up trusts in SA is just problematic.

That is, it doesn’t matter what the trust documentation says about which state laws apply, the law that applies is the law of the state that has the greatest connection to the trust assets.

Essentially then, where are the trust assets?

If they’re property in Queensland, then the opinion is that the Queensland law applies and the rule of perpetuities is still an issue despite the attempts to say that the laws of SA apply to the trust.

So what does this all mean to you as an investor?

Well, if you have an existing trust, there’s nothing you can do to alter the expiration date so you’re stuck with it.

Would you set up any new trust in SA?

That’s a matter you’ll need to take professional advice on.

Experience with family trusts generally shows that once mum and dad pass on, in most cases the family sells the assets off, divides the profits and then winds up the trust.

For the latest property market information visit the blog section of the Naked Real Estate website.

Written by Naked Writers

Family Trusts - How to Avoid the Expiration Date
Naked Writers

Naked Real Estate Writers collaborating to bring the latest news and trends in real estate for buying, selling and working in the exciting world of real estate. Is it time for you to get Naked?

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