In this edition of It depends, partner Clinton Jackson discusses the peculiarities of trust vesting.
If you have questions on this topic, including what the new 125-year rule in Queensland could mean for you, join our upcoming webinar on 29 July.
Register here: https://cgw.com.au/event/webinar-when-does-my-trust-end-and-why-does-it-matter-the-complex-question-of-trust-vesting/
Video Transcript
Hi, and welcome to this episode of It depends. Today, we're going to be talking about the new 125-year vesting date that applies for trusts in Queensland from 1 August 2025.
What is a vesting date and why is it important?
The vesting date for a trust is important because it's essentially the date on which a trust will end. Now, what that actually means will depend on the particular trust itself, and the wording of the trust deed. However, at the very least, when a trust ends, the discretionary powers that a trustee has, effectively cease, and that trust becomes a fixed trust from that moment in time. So, for example, where you have a trust with mum and dad as the default or main beneficiaries, that trust will cease to be discretionary, and the ability to distribute income amongst a wide group of beneficiaries will disappear, and mum and dad will then receive the income from that trust each year, moving forward in their fixed percentages of 50/50, or whatever the trust deed says. Now, in addition to that, other things that do happen is some trust deeds actually require all the assets to be gathered in and distributed out to the beneficiaries. So, we have no ability to keep that trust running even in that more limited, fixed trust type concept. Now, what that actually means is that we will be transferring all the assets from the trusts to the beneficiaries, which will potentially trigger tax and duty consequences.
When does a trust vest?
It depends. The maximum permitted perpetuity date or vesting date for a trust in all states and territories other than South Australia is 80 years currently, that is, before 1 August 2025. However, from 1 August 2025, Queensland gets a new vesting period of 125-years, which is an increase of 45 years from the current 80-year period. However, that 125-year period will not automatically apply to your trust, or most trusts, and that is because the trust deeds themselves set out the actual vesting date for the trust, in most situations. So, for existing trusts, they will usually have either an 80-year period, or some earlier date because you can have an earlier date, if that is what's specified in the trust deed. And some trust deeds that we've seen even from the mid-eighties or so have 40, 50 or 60-year vesting dates and you should check those, carefully and probably quickly, and extending them where appropriate.
Will the new 125-year vesting period apply to my trust?
It depends. As the vesting dates or the maximum allowable vesting periods are set by state-based legislation, it will depend on which law governs your trust. So, to get the new 125-year vesting date, or vesting period, we need to have a trust that is governed by Queensland law as the very first step. Now, for our trust to be governed by Queensland law, we need to at least have some connection to Queensland. And that includes either having a Queensland based trust deed, Queensland based beneficiaries or Queensland based assets. So, before we can even look at whether the 125-year rule will apply to you, we need to have one or more of those types of connections. Once we've passed that hurdle, we then need to look at to see what our trust deed says. Now, our trust deed will most likely have an earlier vesting date, as I previously mentioned, based on the past law. So, where our trust deed does have an earlier vesting date, we then need to look at taking additional steps, as to whether it's possible to upend.
Can I amend my trust deed to extend the vesting date?
Once again, it depends. Assuming we have a Queensland based trust for a Queensland trust that Queensland laws apply to, we then need to check to see whether it's possible to amend the vesting date of that trust. Now, to do that we need to firstly look at the variation power. Now, a lot of trust deeds have broad variation powers, which would be sufficient to allow us to extend the vesting date by a way of simple variation. And where that's the case, we would prepare that variation deed and get it signed by one of the parties. However, there are some trust deeds out there that do not have a broad enough variation power, and we need to be really careful about this because if our variation power is not broad enough, then any variation deed we prepare to extend a vesting date, will be invalid. However, it doesn't stop there. We may have some other options available to us. Under the new property law act which introduces this 125-year vesting date rule, they have included a specific provision that allows all the beneficiaries of the trust to agree to extend the vesting date, even if it is outside the variation power. Now, for some trusts, where they are very limited beneficiaries, this will be very practical and cost effective. However, for our normal broad-based family and discretionary trusts that have a really wide range of beneficiaries that rule will most likely be impractical to use. Where that's the case, we then need to look at what other options we have available to us. And there is always the option of applying to the Supreme Court of Queensland, to have them authorise a variation of trusts.
We've done this a number of times in the past and have been successful in similar situations. So, this option is available to you. Now, if you have any more questions about trust vesting, 125-year vesting dates, or trusts generally, please contact a member of our team. Also, Scott and I are holding a webinar on 29 July 2025 to talk about these new trust vesting rules and what it means for you. So, please come along and join us there if you have more questions. Thank you very much for watching this episode of It depends.
Cooper Grace Ward is a leading Australian law firm based in Brisbane.
This publication is for information only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as legal advice. If there are any issues you would like us to advise you on arising from this publication, please contact Cooper Grace Ward Lawyers.
