A Matter of Trusts
A failure to document a trust relationship at the time of acquisition may not always be fatal.
Introduction
Typically, but not always, land is legally and beneficially owned by the person registered on the title. However, sometimes the legal owner owns the land as trustee, the terms of which are supported by a written trust deed.
In the absence of a written trust deed, your client may maintain that the land is owned pursuant to a “bare trust” and the person registered on the title is the trustee (the legal owner) holding the land on trust for a beneficiary (the beneficial owner, or owners if there is more than one beneficiary).
Where the bare trust relationship is undocumented, the client might be concerned as to whether expected dealings in respect of the land trigger undesired tax outcomes.
In particular, issues can arise when:
the parties wish to vary the land title deed to record the beneficiary on the title (ie remove the trustee from the title);
a party has passed away and there is uncertainty about whether the land forms part of their estate; or
a party asserts that they qualify for the CGT main residence exemption in respect of the disposal of the land (and dwelling).
Is the absence of a written trust deed or declaration of trust at the time of purchase fatal? As discussed below, not necessarily, as objective facts can be persuasive in supporting the intentions of the parties.
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