Advisers and trustees should be aware SMSF trust deeds containing errors can be rectified without having to draft a completely new replacement document, a specialist law firm has said.
Townsends Corporate and Business Lawyers said many trust deeds may contain typographical errors or may have been furnished with incomplete names of the SMSF trustees.
However, an instrument called a deed of rectification can be used as a solution to any issue a slightly incorrect trust deed may cause.
“[A deed of rectification] is a formal document that notes and corrects a mistake contained within a previous trust deed. The error could potentially be anything, but we find the most common errors are typos in relation to either the name of the fund or trust or the name of a member or beneficiary,” the legal firm said.
“A deed of rectification is read in conjunction with your previous trust deed and therefore does not replace the previous deed.”
Townsends highlighted a situation where an SMSF was looking to buy a property but the transaction could not be completed due to errors in the original trust deed.
Specifically the middle name of one trustee had been omitted from the document and the bank involved required the error to be fixed before settlement could be completed.
“The only way forward is a deed of rectification. That is because a deed is a formal and solemn form of document with many hundreds of years of history,” the law firm said.
“It is very old law that the only way to amend such a formal and solemn document is with another similarly formal and solemn document – another deed; this time a deed of rectification.”
According to Townsends, third parties such as the ATO, banks and auditors would view a deed of rectification as a suitable document to correct trust deed mistakes.
