Trusts

Trusts

We can assist you with structuring your business or investments through trusts.

Trusts can be used as a tax minimisation strategy; as a means of providing shared income for family members; to minimise the risk of creditors making a claim against your assets; and to place valuable assets out of the direct control of individuals at risk of making poor decisions that may affect various stakeholders.

Trusts are no longer used only for wealthy people or families and are increasingly being recognised as a pragmatic solution to ensure peace of mind about the future of your assets and are usually created in addition to a will. Typically, a trust offers more control of your assets than a will. They can be set up at any time or written into your will.

There are different types of trusts, and these are treated differently for tax purposes. Trusts are set up by a settlor, require at least one trustee to administer the trust and have beneficiaries who benefit from the trust.

While anyone can set up a trust, they often include some complex legal considerations and knowing which type of trust to set up will be key.

Specific reasons to set up a trust

  • to control and protect family assets
  • to manage the affairs of children or young adults
  • when someone cannot handle their affairs because they are incapacitated
  • to pass on assets while you are still alive
  • to pass on assets when you die (a ‘will trust’)
  • under inheritance rules, if someone dies without a will

The benefits of a trust

People set up trusts for many different reasons. The practical advantage of trusts is the separation of the legal owner from the beneficiaries. Some of the benefits include:

  • avoiding certain taxes
  • avoiding probate
  • protecting your privacy
  • saving money
  • establishing a lasting legacy

Setting up a trust

To be legally valid a trust must be clear and certain on three crucial aspects:

  • the intention of the creator to set it up
  • the subject, i.e., the assets of the trust
  • the objects of the trust, i.e., the beneficiaries

You should also consider the terms of the trust. The legal wording of the trust deed is thus extremely important to get right, especially as trusts can be contested.

Types of trusts

The main types of trust are bare trusts, interest in possession trusts, discretionary trusts, accumulation trusts, mixed trusts, settlor-interested trusts and non-resident trusts.

One type of discretionary trust is a family trust. A trustee (frequently one of the family members) is elected to hold assets in their name for the benefit of a group of beneficiaries. Although one or more persons can be elected as trustee, so to can a company. This can be beneficial in situations such as the death of a trustee, or in circumstances where a trustee is declared bankrupt.

Choosing or being a trustee

There must be at least one trustee of any trust. Trustees are the legal owners of the assets being held in trust. They manage the trust on a day-to-day basis and are required to meet all and any legal obligations such as paying the right tax. They decide whether and how the assets should be invested or used.

The original document, setting up the trust, known as the trust deed, usually sets out the framework or intention of the trust. It is important to choose people you can rely on to be trustees and make sure they agree to the role. Equally if you are being asked to be a trustee, ensure that you are familiar with what is expected of you and who you will be working with, i.e., the other trustees. There are professional trustees who will charge a fee to act on behalf of the trust.

We can assist you with:

  • setting up trusts tailored to your individual circumstances;
  • reviewing trusts to ensure they comply with financial and trust-related legal requirements;
  • working with your accountant to make suitable arrangements;
  • providing advice for structuring your trust in ways to minimise the chance of claims being made under family law or debt recovery proceedings.

If you need any assistance, contact one of our lawyers at [email protected] or call (023) 9225 9822 for expert legal advice


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