mCW Trust Series
The Trusts Bill 2024 (Qld) (Proposed Bill), introduced into the Queensland Parliament on 21 May 2024, aimed to modernise and simplify the existing Trusts Act 1973 (Qld) (Existing Act). The Proposed Bill lapsed upon the dissolution of the Queensland Parliament on 1 October 2024. This means that the Existing Act remains in effect until the Proposed Bill is re-introduced into Parliament, has been passed and receives royal assent. We consider it likely that the Queensland Parliament will re-introduce the Proposed Bill and take steps to achieve its goal of modernising and simplifying the Existing Act.
To address these potential changes and common questions regarding trusts, the McInnes Wilson Lawyers (MCW) Tax and Private Advisory Services team has created the MCW Trust Series, covering:
- Who can be appointed as a trustee of a trust?
- How are trustees removed and appointed?
- What are the powers of the trustee?
- Can the trustee delegate their powers?
- What are the duties of the trustee?
- What are the rights and obligations of beneficiaries of a trust?
- When does a trust become a foreign trust?
This article explores the third of seven topics: What are the powers of the trustee? Future articles will delve into the remaining topics available at the links above.
We note that the MCW Trust Series considers the trusts legislation in Queensland. If you have questions about trust legislation outside Queensland, please contact us for tailored advice.
key takeaways
What is a trustee?
The trustee of a trust is a person or company appointed to manage the day-to-day operations of a trust. This includes managing assets, engaging professional advisors (e.g. financial advisors, accountants or lawyers), and distributing income or capital from the trust to beneficiaries.
rules governing trusts
Broadly, in Queensland, trusts are governed by:
- the trust deed; and
- the Existing Act (or potentially the Proposed Bill).
In order to determine who can be the trustee of a trust, it is necessary to consider both the trust deed and the Existing Act.
trust deed - What are the powers of the Trustee?
The trust deed will record the establishment of the trust and will generally set out the rules, powers of the trustee, and the rights of any beneficiaries of the trust.
The trust deed will generally include a broad range of powers to allow the trustee to deal with the assets of the trust.
However, it is important that the trustee reviews the terms of the trust deed before taking any action in relation to the trust or dealing with any assets of the trust. This is important because the trustee must ensure that they have the necessary powers to carry out their intended actions.
This is particularly important where the trustee is considering entering into a related party transaction (e.g. selling a property to themselves or lending money to themselves or their family members).
It is also essential for the trustee to review the powers set out in the relevant legislation relating to the trust (e.g. in Queensland the Existing Act).
Existing Act and Proposed Bill – What are the powers of the Trustee?
The Existing Act applies to all trusts governed by Queensland law, outlining a range of powers, obligations, and entitlements of parties involved in a trust.
The Proposed Bill confirms its application to all trusts governed by Queensland law, regardless of whether the trusts were established before or after its commencement. It also overrules any conflicting provision in the trust deed (unless explicitly permitted by the Proposed Bill).
We outline the relevant provisions of the Proposed Bill and Existing Act below.
existing act
Part 4 of the Existing Act sets out the general powers of the trustee. These powers may be exercised regardless of whether the trust deed prohibits them, except in cases where the Existing Act allows the trust deed to prohibit the trustee from exercising the powers.
Some examples of the powers set out in Part 4 include:
- the power to deal with trust property (e.g. selling, disposing of, renovating, repairing, subdividing, or leasing it, entering into contracts or documents to give effect to that and pay any outgoings on the property);
- the power to insure trust property against risk, where it would be prudent for an individual or company to do so if acting for themselves;
- the power to employ agents (e.g. solicitors, accountants, financial advisors) or attorneys to transact any business or do any act required to be done in the execution of the trust or the administration of trust property; and
- the power to convert any business of the trust into a company (subject to any restrictions in the trust deed).
proposed bill
The Proposed Bill simplifies trustee powers by confirming that trustees have all the powers of an absolute owner of the trust property.
The Proposed Bill allows trust deeds to limit or modify these powers, except for the following specific powers to:
- sell the trust property;
- lease the trust property or to renew, extend or vary a lease of the trust property;
- mortgage the trust property or to renew, extend or vary a mortgage of the trust property;
- deal with corporate securities;
- settle debts or claims relating to the trust property; and
- insure the trust property against the loss of or damage to the trust property or any risk or liability relating to the trust property.
The Proposed Bill also introduces an express power to postpone sale of trust property (where the trustee has a duty to sell) and to take actions necessary to give effect to their powers.
The Proposed Bill streamlines and clarifies the powers of trustees, explicitly identifying powers that cannot be modified by the terms of a trust deed. If enacted, the Proposed Bill provides greater certainty for trustees, making it easier to determine whether they have the necessary authority to carry out specific actions. This simplification is intended to reduce ambiguity and enhance the efficiency of trust administration.
Existing Act and Proposed Bill – Can the Trustee Delegate Their Powers?
Trustees may delegate certain powers to another person in certain circumstances.
Our next article in the MCW Trust Series discusses how trustees can delegate their powers and the proposed changes in the Proposed Bill. Click here to read more.
conclusion
It is necessary for trustees to review the trust deed and relevant trusts legislation to confirm whether they have the necessary powers to act.
The provisions of the Existing Act regarding trustee powers are complex and may be difficult for trustees to navigate. The Proposed Bill aims to simplify these provisions by confirming that trustees have all the powers of an absolute owner of trust property while allowing trust deeds to impose limitations (except for the specified powers listed above).
If the Proposed Bill is enacted, it will simplify the process for trustees when determining whether they have the required powers to act or enter into transactions.
how can mcw help?
Contact Emily Ryan or Kimberley Barnes from our Tax and Private Advisory Services team if you would like to discuss who can be appointed as a trustee of a trust, or if you would like to discuss trusts generally.
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