Two recent legislative changes potentially assist trustees of trusts with early (or short) vesting dates.
Occasionally we see trusts with vesting dates of less than 80 years, and with no power to vary the trust deed.
There can be many valid reasons to want to keep a trust about to vest ongoing. One solution has been to act prior to the vesting date and resettle the trust onto another trust, with a power of variation and to extend the vesting date. This presupposes that there is a power of resettlement, but if there isn’t, caselaw can provide authority to resettle, depending on the other terms of the trust deed and status of the beneficiaries. Sometimes it may be necessary to apply to the High Court to authorise a resettlement.
An issue that has arisen in the past is that the resettled trust’s perpetuity period cannot exceed the original trust deed’s perpetuity period. This all changed with the Trust Act 2019 which repealed the Perpetuities Act and the common law rule against perpetuities. Section 17 of that Act provides that on a resettlement the new trust can extend it’s vesting date out to 125 years from the date of commencement of the original trust.
In addition, a recent amendment to the Income Tax Act 2007 also provides some assistance in this area. From 1 April 2022, a resettlement between “roll-over” trusts will not give rise to a new bright-line date for residential land in the new trust.
This Insight is not intended to provide an exhaustive or comprehensive statement of tax law and it should not be relied on or used as the basis for any decision or legal action. Detailed professional advice should always be sought in order to verify the applicability of the relevant legislation to the specific case.