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Family Trust

What is a Family Trust?

A Family Trust is a structure which is used to hold assets or operate a business for the benefit of others, known as beneficiaries. The trustee, the person who operates the trust, owns all of the assets and controls the business. The benefit, such as excess cash, flows to the beneficiaries at the discretion of the trustee.

As the beneficiaries only obtain a benefit at the discretion of the trustee a Family Trust is more properly known as a discretionary trust. The other type of trust which is common is a unit trust. In a unit trust the beneficiaries each own a fixed proportion of the assets held by the trust. In that way unit trusts are very similar to companies.

When would you use a Family Trust?

Family Trusts deliver a number of benefits depending on the circumstances.

They can be used:

  • For asset protection purposes, so that assets are not exposed if someone goes bankrupt.
  • To set aside money for a particular purpose. Such as for your grandchildren when they come of age or to support a special needs person who cannot manage money themselves.
  • To disperse the income from income generating assets to various members of the family who can most benefit from the money. In doing so the amount of tax paid on that income may be reduced.
  • To operate a business as an alternate to, or used in conjunction with, a company. The family trust may own the shares in your own company or companies allowing the dividends to flow into the trust where they are dispersed to the beneficiaries.

These are the most common uses. However, there are a range of other purposes which people use these structures for.

What is required?

The basic components of a Family Trust are:

The Trust Deed – which documents the existence of the trust and importantly details the powers of the trustee.

Trustee – which may be an individual, joint individuals or a company. This is the person who legally owns all of the assets and controls how those assets are used and how the benefits flowing from the assets are dispersed to the beneficiaries.

Beneficiaries – These are the persons who are entitled to be considered to receive the benefits flowing from the assets. In a typical Family Trust scenario, this will be mum, dad, the children, all of the children’s children as well as their spouses. The beneficiaries will typically include the extended family and any trust or company owned by a beneficiary.

Settlor – This is the person who essentially forms the trust. Usually your lawyer or accountant and they may even put the first $10 into it to get you started.

Who needs a Family Trust and how do I form one?

Family trusts are not only for married couples with children at university.

As discussed above the asset protection value of a Family Trust is a benefit gained by a person of any age. Even young single entrepreneurs need to consider where their business may be in 5 or 10 years and who they may be sharing their life with. A Family Trust set up today can be set up to include a future spouse and children.

It is easy to have a trust set up for you. There is no requirement for registration, no government charges and no need to report its existence to anyone. However, you will need the assistance of a lawyer to draft the deed for you and if you are looking at using the trust for financial or tax purposes you should consult a financial planner.

If you need a Family Trust we can prepare the Deed, act as Settlor and guide you through the process

We can even direct you to quality resources which can help you manage and better understand your trust

Get a more beneficial financial structure

Call us today to discuss the benefits of Family Trusts and arrange for us to draft and settle one for you.

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IT Lawyers Brisbane