A trust is a relationship between a trustee (a person or other entity) to hold assets for the benefit of beneficiaries. The Australian Taxation Office (ATO) treats trusts as taxpayer entities for tax purposes. A family trust is a discretionary trust set up to hold family assets or to conduct a family business.
Why set up a family trust?
Family trusts are generally set up for the following reasons:
- Asset protection.
- Tax minimisation.
- Retirement planning.
- Succession and estate planning.
Trustees have discretionary power to decide on the type and amount of funds to be distributed to the beneficiaries.
Setting up a family trust
Trustees can be a non-professional family member, a professional individual (attorney or accountant) or a corporate fiduciary (bank or investment firm). A trustee must understand his/her obligations to act in the best interests of the beneficiaries.
Choosing a beneficiary/beneficiaries for your estate can be influenced by several factors including the amount of asset to be distributed and the ability of the beneficiary/beneficiaries to manage the asset responsibly.
A person can also nominate a non-family member as a beneficiary.
Assets that can be included in a family trust include land and property, savings accounts, investment accounts, shares and bonds and life insurance policies.
4. Family trust deed
Most websites have draft forms that you can use to create a draft of the trust. However, if the trust involves complicated division of assets and other special conditions, it will be better to seek advice from an attorney to ensure that everyone’s interests can be protected.
To start, a small initial sum of money is provided to the beneficiaries. The family trust then falls under the management and control of the appointed trustee/trustees.
6. Stamp duty
Family trusts may incur stamp duty. The amount you have to pay will vary from state to state.
7. ABN and TFN
The law requires that the family trust obtain an ABN and TFN. Your tax lawyer or accountant will be able to set this up for you.
8. Bank account
A separate bank account must be opened to hold all the funds of the trust. The account is opened in the name of the trustee as ‘the trustee of a trust’.
Trusts can be an effective way to protect your assets and to keep it within the family. Talk to a tax lawyer today to find out more about trusts and how they can protect your family’s future.
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