The Supreme Court of Victoria has dismissed an application under s 63A of the Trustee Act 1958 (Vic) seeking to vary a family trust to give the trustee a general power of variation.
In 1970, Mr Synman created the Alan Synman Family Trust. The trust deed requires the trustee to hold the trust property until the vesting date, namely, upon the death of the survivor of Mr Synman (age 71) and his wife (who died in 2010). On the vesting date, the trustee is directed to distribute the trust property among their children. Mr and Mrs Synman had 2 daughters (each of whom have 2 children, so that there are 4 grandchildren of whom 3 are under age 18). The effect of the trust is that the grandchildren only acquire an interest in the income of the trust if their mother is deceased and the trustee has failed to exercise a discretion to make a distribution of trust income. The trustee applied to the Court seeking to vary the trust to give the trustee a general power of variation to give effect to the intention to benefit Mr Synman’s family. The trustee indicated that the power of variation would be used to, among other things, give the trustee power to distribute capital (as well as income) to any of the beneficiaries.
In dismissing the application, the Court refused to approve the variation to the trust, as it was not satisfied that granting such a wide power of variation would be for the benefit of the grandchildren (who were incapable of consenting to the changes). The Court noted that a proposal to vary a trust cannot be approved under s 63A of the Trustee Act 1958 (Vic) unless it would be for the benefit of those who cannot consent. While some of the proposed variations were likely to benefit the grandchildren, the Court noted that granting the trustee the power to vary the trust would not be limited to those variations foreshadowed by the trustee.
Instead, the Court suggested that the appropriate path is for a trustee to seek the Court’s approval of an arrangement to vary specific provisions of the trust deed (rather than a general power of variation).
(Re, in the matter of the Alan Synman Family Trust [2013] VSC 364, Supreme Court of Victoria, Ginnane J, 19 July 2013.)
[LTN 153, 9/8/13]