SMSF trust deeds must be checked thoroughly for vesting dates as shorter perpetuity periods were not unheard of, according to an expert SMSF lawyer.
“Trusts have a finite life,” DBA Lawyers director Bryce Figot said.
“In every jurisdiction that recognises trusts, there is typically a limit.
“But generally the trust must vest within 80 years.”
Advisers and their SMSF trustee clients needed to check over deeds in case of specified vesting dates, Figot said.
“I was speaking to a lawyer the other day who said a lot of people in South Australia wouldn’t even think of this, but there are deeds in South Australia that are actually locked into a vesting date. Often they were prepared by people outside of South Australia or before the perpetuity rules were abolished there,” he said.
In addition, there were a surprising number of deeds, especially older ones, that did not extend to 80 years, he said.
“So check the vesting date,” he said.
“There are ways to deal with it, but it is surprising that there are a number of trusts out there and you think when doing succession planning, ‘great, it’s going to be around for a long time’. Not necessarily.”