TRUST PURCHASES AND DECLARATION OF TRUST
Many farming clients choose to buy their farming properties in a newly formed or an established Family Discretionary Trust. When buying in this format it is extremely important to get the correct wording on the Offer and Acceptance document. It needs to be correct right from the first version of the Offer and Acceptance as it is difficult to change once the contract is signed.
It is important for the Trustee details to be exactly correct, whether the Trustee is a personal trustee or whether there is a company acting as Trustee of the trust. It is also vital that the Trust name is correct.
It is amazing how often either the Trustee or the name of the Trust is incorrect on contracts.
If there is any doubt about the correct Trustee the buyer should review the Trust Deed and any variations to the Trust Deed to ensure that the Trustee name and the Trust name are both correct on any contract being entered into.
As part of the settlement arrangements, WA Property Lawyers always prepare a Declaration of Trust in a bound document form. This Declaration of Trust is stamped with the Offer and Acceptance at the Office of State Revenue and both are subsequently provided to the buyer. The Declaration of Trust confirms in writing that the Trustee is purchasing the property on behalf of the trust and will hold it as such.
The reason the Declaration of Trust is so vitally important is that the Certificate of Title can only show the Trustee name. It does not show the Trustee as trustee of the Family Trust. When a title search is subsequently done, the title will only show the Trustee name. The best evidence to prove that the land is held by the Trustee on behalf of the Trust is the stamped Offer and Acceptance and the stamped Declaration of Trust.
There will be times in the future existence of the trust that the buyer needs to prove to the Office of State Revenue that the Trustee holds the property on behalf of the Trust. Examples of when this is needed is when you may wish to vest land out of the trust to a beneficiary or when you may wish to change the Trustee to a member of a younger generation. The stamped Declaration of Trust is the best evidence and should be kept with the trust documents for the life of the Trust. This may be anything up to 80 years so a long term record keeping system is vitally important.
WA Property Lawyers also provide a copy of the stamped Contract and the stamped Declaration of Trust to the client’s accountant but the buyer should take responsibility for their own record keeping and keep the bound documents for the life of the Trust.