Update Unit Trust’s Trustee – build a Deed to change Trustee of a Unit Trust

Update the Trustee of Unit Trust – change the Trustee of the Unit Trust

Build a Deed of Variation to change the Trustee of a Unit Trust. The update of the Unit Trust’s Trustee cleans up who the trustee is for your Unit Trust. You are changing the trustee to suit your needs:

• A Trustee may be dead or retiring: ‘leaving‘
• A Trustee may decide to remain as a Trustee. The Trustee continues to be a Trustee: ‘remaining‘
• A Trustee may be coming on as a new Trustee: ‘new‘

All Australian Unit Trusts must have a trustee. A Family Trust needs a trustee. A 3-generation Testamentary Trust Will need a trustee. Your Self-Managed Superannuation Fund needs a trustee. And, of course, your Unit Trust needs a trustee.

From time to time, you may need to change the trustee.

Can I change the Trustee of the Unit Trust with a Minute or note?

You can only change the trustee via a Deed of Variation. Your Unit Trust deed was created as a Deed. It can only be updated by a Deed. A ‘minute’ or note is not sufficient to change the trustee of an Australian trust.

John (the human) wants to escape being the Trustee of the Unit Trust

In this example, many years ago, John and his business partner Peter started a business. It operates out of a Unit Trust.

To save money, they decided not to build a company to be the trustee of the Unit Trust. Instead, John agrees to be the trustee of the Unit Trust. So the trustee of the Unit Trust is a human.

Tony was not so silly. Tony was not prepared to go as trustee of the Unit Trust. This is because he had assets in his name and a home. Following the asset protection strategy ‘man of straw and woman of substance‘ Tony’s wife told Tony not to take on risky jobs. Being a trustee of a unit trust that runs a business is risky.

John and Tony met with their adviser to discuss asset protection. Their adviser explains that there is a risk in being a trustee of a unit trust. (The adviser actually called John ‘stupid’, which as a lawyer, I thought was a bit blunt. But it did get the point across.)

The adviser correctly explained, “If the Unit Trust goes insolvent, then the trustee is often liable for the trust debts”.

John is shocked (Tony is less shocked). They immediately:

1. build a company designed to be the trustee of a Unit Trust here; and
2. build this “Change Unit Trust Trustee” to replace John as trustee for the new company (press the blue button above to start building)

• • John – leaving
  • New Company Pty Ltd – new

Reliance Financial Services Pty Ltd v Antalija – the dangers of being a human trustee for a Unit Trust

In Reliance Financial Services Pty Ltd v Antalija Developments No 4 Pty Ltd (No 4) [2023] NSWSC 1260 firmly underscores the risks associated with individual trustees in Unit Trusts. In a concise ruling, the Court affirmed the fundamental legal principle that a trustee enters into contracts in their own name and holds legal responsibility for agreements made in their capacity as a trustee.

If a trustee becomes liable due to their actions in that role, their only recourse is to seek indemnity from the unit trust assets. But this is useless if there are no assets in the Unit Trust. The court does not have the discretion to release a trustee from this personal liability.

It becomes challenging to justify the use of human trustees in unit trusts. Instead, build specially designed corporate trustees on Legal Consolidated’s website.

What does a Trustee of a Unit Trust do?

The primary job of a trustee is to administer the Unit Trust according to the Unit Trust Deed and the Unitholders. The trustee generally has no assets, itself. It just holds the Unit Trust assets (as trustee) for the Unitholders (beneficiaries).

Update the Unit Trust’s Trustee where:

• the trustee retires, dies, goes bankrupt, or is insolvent
• you go from a human trustee to a corporate trustee (the company becomes the new trustee)
• you go from a corporate Trustee to a human trustee
• you want a single trustee-only (e.g. your Unit Trust currently has two trustees, but now you only want one)

Should I have two trustees for the Unit Trust?

For asset protection, just one Trustee is better. This is because the trustee is an at-risk person. What happens if the Unit Trust goes insolvent? The trustee often goes down with the Unit Trust.

Further, for added asset protection, make the new trustee of the Unit Trust a company. Build a new company here.

Transfer the Unit Trust assets to the new Trustee?

Yes. The legal owner of the assets in the Unit Trust is the trustee. As you got rid of the old trustee and put in a new trustee you now must transfer the assets out of the old trustee’s name into the name of the new trustee.

It is the job of the trustee of the Unit Trust to hold the legal title and protect the trust assets. That is a core job of any trustee.

Any stamp duty or CGT when you change the trustee of the Unit Trust?

Does the Unit Trust own bank accounts, shares, and real estate? You transfer these from the old trustee into the new trustee’s name. To transfer land, you need to have completed transfer forms stamped.

Legal Consolidated does not provide tax or stamp duty advice. Speak with your accountant.

Any Capital Gains Tax when I replace a Trustee in a Unit Trust? Is a change of trustee of a Unit Trust a CGT event?

A change of trustee involves the transfer of legal title of the Unit Trust’s assets. Legal Consolidated does not provide legal advice including advice on taxes and other imposts. Speak with your accountant.

‘Register’ the Deed of Variation to change the Trustee?

An advantage of Unit Trusts over companies is that Unit Trusts are mostly unregulated. Companies are over-regulated.

An example is that you do not lodge the Unit Trust or any Deeds of Variation of the Unit Trust (such as the one you are building) anywhere. However, keep the Unit Trust deed and all Variations of the Unit Trust somewhere safe. And make sure your accountant holds an original as well. Banks and the government do NOT accept copies. Banks and the government do NOT accept certified copies.

Free legal advice to help you build the Change of Trustee of a Unit Trust

 

1. On the top right-hand side of this page, press CLICK TO DOWNLOAD to see a full free sample of our cover letter, minutes and Deed to update your Trustee.
2. Your Education and Empowerment starts by pressing START FOR FREE. Answer the questions and read the hints. Every question, since 1988, about updating a Trustee for a Unit Trust is answered in the hints.
3. Answer as many questions as you can. Read the hints. Then you are welcome to telephone the law firm. Together a lawyer reviews the answers with you. This is a free service. But start building the Unit Trust Update of a Trustee first as the building process, answers most questions.