This article aims to clarify some of the uncertainties and difficulties that arise on the appointor or guardian of a discretionary trust losing their decision-making capacity
In the November 2019 issue of Taxation in Australia, this column reviewed some of the common problems that arise in relation to the position of appointor of a discretionary trust, being the entity empowered to appoint and/or remove the trustee of the trust.1 These issues included the difficulty in amending the clauses of a discretionary trust deed pertaining to the appointor when the deed’s variation power limits any modification to the “trusts”, instead of providing some other, more flexibly-worded authority, such as a power to amend the “trusts, terms and conditions” or “provisions”. In addition, conflict issues related to the exercise of the power of appointment were discussed, as well as the ways in which a joint appointment could inadvertently be extinguished on the death of one or more of the constituent appointors. In this article, we revisit the position of appointor and, in particular, the problem of appointors (and guardians) of discretionary trusts losing decision-making capacity, and examine the relevant legislation and case law and some practical solutions to these problems.
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