22 October 2020
Trusts - Removing a beneficiary
Is it possible to amend a trust deed so that it excludes a specific person from being a beneficiary of a discretionary trust despite the person falling within a class of eligible beneficiaries in the trust? If yes, what are the implications of doing so?
Thank you for the question.
As it is entirely within the discretion of the trustee to decide which beneficiaries receive income or capital of the trust it is not necessary to remove a beneficiary to exclude them receiving a benefit, assuming there is control of the identity of the trustee.
Assuming the trustee has the power to add or remove a beneficiary then the trustee may do so by declaration or by executing a deed of variation of the trust. A beneficiary is also able to renounce their interest in the trust in writing.
A trustee’s reasons for altering a trust deed to exclude a beneficiary may become subject to scrutiny: see Schreuders v Grandiflora Nominees Pty Ltd [2014] VSC 310.
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