“I can’t find my SMSF trust deed. What should I do about this?” There aren’t too many SMSF administrators who don’t have to deal with an email or phone call that starts along these lines on a regular basis.
Unlike other some other trusts, you can’t run an SMSF without a written deed.
One of the most important jobs that SMSF trustees have to do is always obey the terms of their trust and these terms are set out in the fund’s trust deed.
This means that without a trust deed you’ll probably be materially confused about how to run your fund.
So in short, a lost trust deed must be replaced. What steps do you need to follow?
Here are some popular solutions:
- Fully amend the deed – this is the most common solution. If you can prove the fund existed (via tax returns, financial accounts etc), then you solve the lost trust deed problem by taking on a whole new set of rules. There are several problems with this option, including your ability to prove that your old trust deed allowed you to adopt a new set of rules. On the whole most people ignore these problems.
- Find it – looking and looking again is a great idea; you should also check with a range of people such as current and past accountants, lawyers, auditors, financial planners, banks and the ATO.
- Other evidence the trust exists – you might have a copy of the original deed and this might be evidence that a trust existed. Your behaviour as trustee and your copy of the deed can sometimes convince relevant third parties that the trust exists. These third parties typically want to make sure you as trustee can’t get out of any legal obligations, and that a Court will support their view of the state of the trust. Commonwealth and all States and Territories have legislation in place that allows an electronic copy of a document to be deemed to be an actual document if another party consents to its use.
- Provide a verifiable copy – You can sometimes obtain an exact copy of your trust deed by approaching the law firm that supplied it. In effect you would be producing a certifiable reproduction of the original trust deed. In some States and Territories this new document has to be lodged and you will have to pay nominal stamp duty before it’s recognised as your fund’s trust deed.
If none of the above are appropriate or possible, you may have to resort to some of the less popular solutions such as:
- Ask a Court to assist you – this has a total cost of about $20,000 in legal work and for most people won’t be a useful solution.
- Close down the existing trust and immediately create another one – this is often referred to as resettling the trust. This often creates capital gains tax and stamp duty problems and most SMSFs wouldn’t elect to use this option.
- Wind up the trust – this option also isn’t popular because of potential CGT and stamp duty payable. One problem with this option is that the rules for winding your fund are in the lost trust deed. So it can be impossible to know your obligations or what process to follow to wind up the trust.
A lost trust deed is very inconvenient and costs money to fix. The best thing is to not lose it in the first place. One way of doing this is to make use of electronic document suppliers who can store and keep copies of all your fund’s documentation.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.