Legal Tip 357: Why you should avoid having one trust Hold Properties in Different states

Generally, I think it is best to avoid having the one trust hold property in different states. This is because any changes to the trust deed will require legal advice to consider the stamp duty laws in each state that the trust holds property in.


Example

Nelson sets up a trust with property in NSW. The trustee then buys property in Victoria. The trustee is an individual and they are getting old and losing capacity. The terms of the trust deed are broad, but the deed will need amending to change the trustee as it would trigger stamp duty in NSW. But there is not the same stamp duty problem in VIC. But since the trustee holds property in VIC too the deed amendment will restrict who can benefit from the VIC property and its income.

Had there been separate trusts each holding property in NSW and VIC only the deed for the NSW one would have needed to be amended and the Victorian one could have had a broader range of beneficiaries.

This is because a change of trustee in NSW can trigger full stamp duty if any continuing trustee is a beneficiary of the trust.


Then there is the new ‘foreign person’ surcharge for stamp duty and land tax. These are all state laws and differ from state to state so when you try to amend the deed so that foreign persons are excluded you might have to go to a definition which covers all states which might also restrict the beneficiaries of the trust more than required.


But against this you would need to also consider the

a) Extra cost in setting up another trust

b) Extra accounting fees

c) Extra complexity

d) Estate planning