Property passing to a beneficiary of a discretionary trust (where the beneficiary is not acting as trustee of another trust)

Circumstances/Transactions:

A transfer from a discretionary trust (the trust) to a beneficiary absolutely (where the beneficiary is a natural person).

For the purposes of s36A: 

• Discretionary trust and beneficiary are defined in s36A(3). 
• The discretionary trust from which property is being transferred to a beneficiary of that trust is called the principal trust.
• The relevant time means the time at which the property first became subject to the principal trust.

A transferee must be a beneficiary of the principal trust at the relevant time or became a beneficiary after the relevant time by reason of s36A(1)(b)(ii)(A) or (B) or (C).

Evidence:

The following information is required: 

1. The Digital Duties Form.
2. A copy of the stamped discretionary trust deed(the trust deed),  together with copies of all amending deeds. 
3. In relation to any trust deed for which a copy of the stamped deed cannot be produced: 
   • A statutory declaration declaring what steps have been taken to locate the stamped trust deed, made by a person having knowledge of those steps. If an unstamped copy of the trust deed is available, explain how it was obtained.
   • Copies of financial statements and income tax returns of the trust for the last three financial years, showing whether the property was dealt with as an asset of the trust.
   • Any other material showing that the property as an asset of the trust, for example:
     • A copy of the contract of sale for the purchase of the property by the trustee (showing capacity as trustee of the trust).
     • If the trustee is a corporation, minutes of a directors' meeting resolving to accept appointment as trustee of the trust and to acquire the property for the trust. 
4. A copy of the historical certificate of title.
5. If the property's title particulars have changed since the relevant time provide copies of the parent titles and the plan of subdivision or consolidation showing how the current title particulars were derived from the parent title.
6. Copies of the financial statements of the trust for the last three financial years. 
7. A statutory declaration by the trustee of the trust, addressing the matters set out below: 
   • State whether the transferee is a beneficiary absolutely (i.e. not as trustee of another trust).

Capacity of trustee

• State whether the trustee has held the property in any other capacity either before or after the relevant time, and if so explain in what other capacity they acted.

• Identify the provision of the trust deed under which provides the trustee with the power to distribute capital to the transferee.

The relevant time

• State the date the property first became subject to the trust.
• Identify the provision of the trust deed which shows the transferee was a beneficiary at the relevant time.
• If the transferee is not named as a beneficiary in the trust deed.
  • Explain how the transferee is considered to have been a beneficiary of the trust at the relevant time, or became a beneficiary after the relevant time.
  • Identify the class of beneficiary that they fall into under the trust.
  • State when they became a beneficiary of the trust.

Consideration and mortgages

• State whether the transfer is part of a sale or other arrangement under which there exists consideration for the transfer.
• State whether the Trust had borrowed funds from another person other than a financial institution (e.g. beneficiary loan accounts, loans from associates etc). State whether the transfer related to the forgiveness of any such loan. If yes, provide full details of the arrangement together with copies of loan statements before and after forgiveness of the loan.  
• If loan accounts (as referred to in the point above) exist and the loans are not to be forgiven as part of the transfer, state how the trust intends to pay out the loans.
• State whether the property was encumbered by a mortgage (whether registered or unregistered) immediately before the transfer. If so provide evidence of the amount owing under that mortgage immediately before and after settlement of the transfer (e.g. account statement, letter from financier).
• State whether the mortgage liability was either: 
  • Assumed by the transferee.
  • Paid out by the transferee with a new mortgage over the property that secures the same or greater amount as that outstanding under the mortgage that existed immediately before the transfer. 
• If the mortgage liability was assumed or paid out by the transferee then state the circumstances for the initial mortgage, including: 
  • When the mortgage was created, in particular was it at or before the time the property became subject to the trust.
  • Whether the mortgage was part of a refinancing of an earlier mortgage. If yes, provide details about when the earlier mortgage was created.
  • Whether the mortgage was created to secure borrowings that have been applied to the improvement of the property. If yes, provide documentary evidence to support this. 
  • Whether the mortgage was obtained in connection with matters unrelated to the property. If yes, please set out what these other matters are.
• If the mortgage liability was not assumed or paid out in full by the transferee, explain how the mortgage liability was reduced or discharged and provide evidence of the source of the funds (e.g. bank/financial statements).