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Trusts, powers and default appointment clauses


A default appointment clause in a trust deed is a clause which operates where the trustee fails to exercise the discretion to either distribute or accumulate trust income, or distribute the capital on the trust vesting. Must a valid discretionary trust include a default appointment clause? After all, the consequence of incompetent or inappropriate drafting may be that the trust is void for uncertainty, resulting in there being no trust.

This article argues that a default appointment is not necessary, provided the trust deed is drafted appropriately, the intentions of the parties establishing the trust are clear, and the trust deed suits the client’s circumstances and objectives. The article provides an overview of trusts, powers and default appointment clauses, and examines the underlying English and Australian case law, to conclude that a default appointment is not required when the correct trust or power is bestowed on the trustee.

Author profiles

John Ioannou CTA
John Ioannou, CTA was admitted as a Solicitor in 2002, is a Principal Lawyer at Macpherson Kelley and leads the national tax practice. He has experience in the areas of tax structuring, tax disputes and commercial transactions. John has a Bachelor of Arts, Bachelor of Laws and a Masters of Law. - Current at 10 March 2022
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Darius Hii CTA
Darius is a tax and estate planning lawyer who works alongside accountants and other advisors to provide comprehensive advice in relation to business and personal succession and structuring which includes: 1 preparing effective wills and estate plans for intergenerational asset protection and transfer; 2 wealth protection strategies; and 3 implementing tax effective business succession and restructuring strategies. In addition, Darius has developed a keen interest in and provides advice in relation to trusts, superannuation, land tax and payroll tax. - Current at 15 June 2022
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