There is often confusion as to whether a trust established by a lawyer or accountant in New South Wales which purchases real property in Queensland, or another state or territory, should have the governing jurisdiction of that trust as the state or territory where the asset is located.
This article covers the general requirements of a trust as well as the relevant considerations when determining the proper governing jurisdiction of the trust.
General Trust Requirements
All trust deeds must expressly stipulate a governing jurisdiction through which the operations of the trust are governed. The implications of the choice of governing jurisdiction are that:
- The trust deed will be governed by the laws of that jurisdiction; and
- All parties to the trust deed submit to the jurisdiction of the courts of that jurisdiction; and
- The trust may be liable to pay taxes under the laws of that jurisdiction.
However, an express determination as to the governing jurisdiction of the trust will not always be determinative. A court may overrule the selected jurisdiction of the trust if the court considered it to be inappropriate or if it is found that it was nominated for an ulterior motive, for example, to circumvent the application of a law of a certain jurisdiction which would have applied had an alternative jurisdiction not been nominated.
Court considerations to determine governing jurisdiction
In Graeme William Ballard and Others v The Attorney General for the State of Victoria [2010] the court held that the proper governing jurisdiction of a trust is the jurisdiction which the trust has its closest and most real connection. In ascertaining that jurisdiction, the following considerations are relevant:
- the place of administration of the trust;
- the place where the assets of the trust are situated;
- the place of business or residence of the trustees; and
- the objects or purposes of the trust and the places where they are to be fulfilled.
As such, when determining which jurisdiction to choose for the trust deed the above factors, given equal weighing, are more relevant than where the trust itself is executed or what an express term of the trust provides.
To seek further clarity as to the general requirements of your trust with respect to determining the proper governing jurisdiction, contact one of our expert Commercial and Trust Lawyers.