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Lawyer warns of dangers of mistranslated rules in deeds

The trustee member rules in many cases are being misinterpreted and included in trust deed documents, which is impacting the ability of trustees to elect enduring powers of attorney, according to an industry lawyer.

Cooper Grace Ward Lawyers partner Clinton Jackson says many trust deeds are replicating the trustee member rules in their deeds in terms of who is required to be a member and who is required to be a trustee in accordance with section 17A of the SIS Act.

It’s not necessary to do that. I understand why they do that – they do it because it makes it clear who can be a trustee and who can be a member, and what we often see if those rules being mistranslated into the deed,” Mr Clinton told Lawyers Weekly's sister publication, SMSF Adviser.

“Often, [this results] in the inability to appoint an attorney who holds an enduring power of attorney as a trustee if a member loses capacity.”

In cases where the trust deed doesn’t allow this to happen, the only other option if the trust deed cannot be amended is to remove the member from the fund, Mr Clinton said.

“Unfortunately, we’ve been seeing that come up more and more as the age of members in SMSFs becomes older and the risk of incapacity is greatly increased.”

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