FAQ | 21 February 2020


What is the “vesting day” for my family trust?


If you are a trustee of a family trust, you may have heard the phrase “vesting day” used in relation to the trust, or seen it written in a trust deed, and wondered what it meant.


In order for a trust deed to create a valid trust, it must specify a date on which the trust will come to an end. This is called the “vesting day”. The trust deed can specify that the vesting day is an exact date or the happening of an event, for example, when the youngest beneficiary turns 25 years old. Trust deeds also generally include a clause setting out what will happen to the assets held by the trust on vesting day.


On the vesting day, the trust ends and the trustees no longer have the powers given to them under the trust deed. This means that the trustees must distribute the assets held by the trust in accordance with the terms in the trust deed and the trust will no longer exist.


As well as setting out what will happen on the vesting day, some trust deeds give certain people the power to change the vesting day. If it is permitted by the trust deed, this power can only be used during the trust term and you cannot seek to change the vesting day after it has occurred.


If you are a trustee of a family trust, it is important to be aware of when the vesting date of that trust is so you can ensure that you follow the terms of the trust and do not breach your trustee duties. For more information about your trustee duties, click here.


If the vesting day for your family trust is coming up, it is important to be aware of the following:

  • -      Terms in the trust deed regarding the vesting day. For example, how you will need to distribute the trust assets on the vesting day and whether you require any information in order to comply with these terms.
  • -      Income tax obligations that may arise on vesting day. For example, whether there are any income tax obligations that arise when you distribute property held by the trust to the beneficiaries who are entitled to receive trust property on vesting day.
  • -      Administration requirements relating to the transfer of trust property, GST returns, deregistration of the trust with Inland Revenue and notifying the bank used by the trust before closing any accounts that are held by the trust.

There are also circumstances where trustees will not be able to comply with the terms of the trust on vesting day. For example, when there are existing claims against the trust property.


For more information about how to comply with your trustee obligations on vesting day, contact Morris Legal.