A possible solution for lost or misplaced SMSF trust deeds could be to implement new governing rules via a carefully drafted deed of variation if the client can accept a degree of risk, according to a specialist SMSF law firm.
DBA Lawyers lawyer Krishna Skandakumar said the question of what to do when a trust deed was missing was becoming increasingly important as more were being misplaced or lost, yet there was little guidance in relation to the problem.
“One of the most fundamental responsibilities incumbent on a trustee of a trust is that they obey the terms of that trust,” Skandakumar said.
“Ordinarily, the trust deed is the document that sets out the rules and terms of that trust, therefore, without a trust deed an SMSF trustee cannot say that they are abiding by the terms of the trust as they cannot know what those rules or terms are.
“Additionally, other parties who may want to rely on specific powers in the deed, for example, banks, may not be able to.”
Ideally, if the trust deed could not be found, an approach should be made to the courts, however, as such as an approach would involve significant costs and effort, many trustees would be unwilling to follow that path, he said.
However, the 2004 Supreme Court of New South Wales case of Bowmil provided a practical solution, he said.
“The SMSF trustee should arrange for a carefully drafted deed of variation to be executed with as many beneficiaries as practical added as parties to the deed,” he said.
“This approach is typically the most practical option available, especially when there is a low likelihood of dispute.
“However, it must be noted that this is not a perfect solution and trustees utilising this solution must be aware that they are assuming some risk.”
