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Discretionary trusts are established for the benefit of the “family” so that you may distribute income and capital to a wide class of beneficiaries referred to in the trust deed. Quite often “beneficiaries” include “brother, sister, spouse…and remoter issues”. What is the risk, for example, if a “brother” who is unaware that he is a beneficiary and received no benefit from the trust, becoming liable? Could he become liable merely because he happens to be the “brother” of the person who established the trust and otherwise had nothing more to do with the trust?
In the recent decision of Smeaton Trust the NSW government sought payment from one such “brother”. The brother was first informed that he was included in the class of beneficiaries by letter from the Chief Commissioner. White J had to determine whether the brother was liable when he was merely mentioned in the trust deed as the beneficiary.
It is important that you check:
- Who are the beneficiaries mentioned in your trust;
- Whether you have been included in a trust established by your relative without your knowledge;
- What are the risks given that you may be unaware that you were included in a “class of beneficiaries”;
- What can be done if you were included but do not wish to become liable.
White J deals with a number of issues relating to such a beneficiary.