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How can you amend a trust?
A trustee does not have an implied power to vary the terms of a trust. The terms of the trust may only be varied:
- in accordance with the terms of the trust, or
- with the informed consent of all beneficiaries (and they all must possess legal capacity), or
- pursuant to an order of the court, either conferred by legislation or as part of the court’s equitable jurisdiction.
On another occasion I will discuss the order that a court may make to vary the terms of the trust. That is not the most common method of varying the terms of the trust. This is because the terms of the trust may contain a power of variation, and usually does. However, the nature, form and extent of the permitted variations differ between trust instruments. If unclear, the power of variation will generally depend upon the language and apparent purpose of the variation clause in the context of the terms of trust as a whole. That is, the variation power is a matter of construction of the terms of the trust.
An example is Re Owies Family Trust [2020] VSC 716. The issue in dispute was whether the trustee could amend the description of the persons identified as Guardian and Appointor. It couldn’t. First, the power of amendment only extended to the trust. It was held that the description of the Guardian and Appointor were not a trust and therefore a change to the Guardian and Appointor was not within the variation power.
Secondly, the power to vary was contained in clause 20 of the trust instruction. The clause applied to “trust hereinbefore”. The Appointor and Guardian were identified in the schedule which appeared after clause 20. For this reason also, the variation power did not extend to the schedule (or any other provision which was not “hereinbefore” clause 20).
The take-home message is that, whilst the terms of the trust may be varied if made in accordance with the terms of the trust, close observance of the power of variation is needed.
