Exciting news for Queensland Trusts may be coming by the end of the year. The Queensland Parliament is currently looking at the proposed Property Law Bill 2023 (Qld) which proposes to extend the vesting date of trusts to 125 years from establishment.
Currently, most modern trusts hold a vesting date of 80 years from the establishment of the trust, which is the maximum the law currently allows.
If passed, this will have significant tax and duty implications for default beneficiaries. If passed without amendment, a trustee with the power to vary the vesting date can do so up to 125 years from the establishment date.
For those without this power, an extension can be made if all beneficiaries execute a deed and are adults with full capacity.
The vesting date is the date upon which the trust will terminate and end. This date is usually stated in the Trust Deed. Queensland law currently limits this date to be no more than 80 years from the establishment of the trust.
When a trust terminates or ‘vests’, the beneficiaries become absolutely entitled to the property of the trust and the trustee loses their discretion to distribute income or capital. This may create capital gains tax (CGT) and income tax obligations as the property moves from the trust to an individual.
By extending the vesting date an additional 45 years, the proposed law is an attempt to allow beneficiaries to push the vesting date out much further to avoid these tax consequences.
What if the proposed law passes?
If the proposed law passes, it will be important to review your Trust Deed and seek legal advice.
Vesting dates of a trust cannot be changed after that vesting date has passed. Generally, the vesting date can be extended prior to it being reached without adverse consequences, however this will depend on the language in the Trust Deed.
It is important to ensure a Trust Deed is amended or varied correctly to ensure the amendment is enforceable and avoid the trust being administered incorrectly to ensure tax and trust law consequences are not imposed.
Stay tuned for updates on the progress of this bill through the Queensland Parliament.
If you need assistance with your Trust Deed or have further questions, contact us today.
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