Trusts are legal arrangements where one person (the settlor) transfers assets to another person (the trustee) to hold for the benefit of another person (the beneficiary). Trusts can be used for a variety of purposes, including tax planning, asset protection, and estate planning. In Australia, individuals and businesses benefit from our expert trustee services. We
What is a trust?
A trust is a relationship between the trustee (holding legal title to trust property) and the beneficiary (for whose benefit the trust assets are held).
Types of trusts
There are various types of trusts, including:
- Discretionary trusts (commonly referred to as ‘family trusts’ although this is actually a technical term under the tax law and you can have a discretionary trust which is not technically a family trust);
- Unit trusts (where unit holders are entitled to a set proportion of the income and/or capital of the trust and, although generally understood to be ‘fixed trusts’, this too is both a tax technical and duty technical term and an ordinary unit trust is unlikely to be a ‘fixed trust’ for either purposes);
- A hybrid trust (as the name suggest, it is a hybrid having both set and discretionary attributes).
Trusts may be suitable business or investment vehicles, however, like all structuring alternatives they have advantages and disadvantages in particular circumstances, for example, discretionary trusts provide a measure of asset protection and flexibility in terms of distributing income or gains from year to year, however, in NSW they are not eligible for the land tax-free threshold, meaning that it will pay land tax from the first dollar of value, which may affect your ability ‘plug’ any investment losses.
How different trusts operate and the advantages and disadvantages of each in your particular circumstances forms part of any informed decision as to how to structure your next business or investment.
Mechanics of a trust
As outlined above, a trust is a relationship between the trustee and the beneficiaries.
This relationship is generally governed by a trust deed, however, there are both legislative and general law overlays.
The trustee, in accordance with the trust deed, exercises its powers. This is generally done by way of trustee resolution.
- If there is an individual trustee, this is by the individual.
- If there is a corporate trustee, this is done by the board of the corporate trustee.
All resolutions should be retained for the trustee’s records.
Which one should you use?
Whether a trust is right for you, and if so, which one suits you the best, depends on your particular circumstances, for example:
- Discretionary trusts are often used in family situations to provide maximum flexibility but beneficiaries have no asset or entitlement to any distributions (it is entirely up to the trustee’s discretion as to whether they receive any distributions from year to year);
- Unit trusts are often used in circumstances involving third parties to provide certainty with regards to interests or entitlements (with those third party unit holders potentially being discretionary trusts themselves to provide maximum flexibility in relation to the distribution of the relevant share from the underlying unit trust).”
Introduction A testamentary trust is a trust created under an individual’s will following their death. They may be contrasted with inter vivos trusts, which are ordinary trusts created during the settlor’s lifetime. Testamentary trusts may be: simple (for example, where the legal personal representative is to hold an asset for a minor beneficiary until they
A trust is a relationship between: the trustee (who holds the legal title to trust assets for the benefit of the beneficiaries); and the beneficiaries (on whose behalf and benefit the trust assets are held). Are there different types of trusts? Yes. There are different types of trusts, for example: discretionary trusts; fixed trusts (including
As an accountant, financial planner or someone with your own trust, you may wonder what Trustee lawyers in Sydney look for when rectifying a trust deed or how they go about it. Rectifying a trust deed corrects one or more mistakes in the trust deed which does not accord with the original intention of the
As an accountant, financial planner, or someone with your own trust, you may wonder what lawyers look for when changing an appointor/principal/guardian (Consenting Party) or how they go about it. The process The process involved in changing an appointor is as follows: review the trust deed and any previous amendments, changes of trustee, or changes
As an accountant, financial planner or someone with your own trust, you may wonder what lawyers are looking for when changing a trustee or how they go about it. The process The process involved in changing a trustee is as follows: review the original trust deed and any previous amendments, changes of trustee or changes