TRUST LAWYER

Discretionary Family Trust

The most common form of trust used by families.

Discretionary trusts allow the trustee to define entitlements for the beneficiaries each year. This can be attractive to families looking to minimise tax implications via the conduit of income streaming. In some circumstances, it also provides an extra layer of asset protection.

In some circumstances, in order to be classified as a family trust, the trust must satisfy the family control test. The family control test will look at, among other factors, who can manage the trust income.

Our will and estate Lawyers will be happy to assist you and your family with general advice for your discretionary trust.

Unit Trust

Fixed or unit trusts are used by business or entities that want to investor hold assets for the unit holders (beneficiaries). The units are basically “company shares” allowing holders to have defined interest in the assets and can be transferred or reacquired by the trustee.

In contrast to discretionary family trusts, beneficiaries of unit trusts have a defined entitlement. This is quite similar to being a shareholder of a company, where the trust is divided into units (similar to shares).

Further, the trustee does not have the authority to decide how they distribute the capital and income of the trust.

For further information on unit trusts, contact our commercial law department today for strategic advice.

Testamentary Trust

Testamentary trusts are a form of discretionary trust created through wills to hold and manage the estate to be distributed in the form of income or capital to the beneficiaries according to the will. There are significant advantages of including testamentary trusts in wills.

Upon the death of the individual for whom the will is created on behalf of, the assets of the deceased person are shared among the trustees of the testamentary trust that controls the assets for and on behalf of the beneficiaries.

There are a number of benefits that accompany establishing a testamentary trust instead of a simple will, including:

Family law separation

In the event that a beneficiary (often a child) is going through, or about to go through, family law separation proceedings, any inheritance they receive through a standard will may be exposed. However, a testamentary trust may be structured so as to reduce the risk of the beneficiary’s inheritance being labelled as matrimonial property, therefore decreasing the likelihood of it forming part of the property pool. If structured correctly, a testamentary trust may result in the inheritance being labelled a financial resource and therefore not automatically divisible.

Exposure to Liability

In the instance that a beneficiary owes money to creditors prior to receiving their inheritance, the inheritance would be exposed to those creditors. However, if the inheritance was received through a testamentary trust, those creditors would not be able to access the assets while they are held in trust.

Minors

If a beneficiary is under the age of 18, a standard will generally stipulate that they will receive their inheritance upon turning 18. The issue? This doesn’t take into consideration the mentality of the beneficiary at the time they turn 18, where they could be irresponsible, financially immature or even facing bankruptcy. Instead, a testamentary trust provides that the nominated trustee can decide when the child is ready to receive the inheritance.

Testamentary trusts can provide greater protection of assets, income tax benefits, superannuation and life insurance interest. To incorporate a testamentary trust into your will, contact our experienced Wills and Estate lawyers.

Charitable trust

A charitable trust is a type of trust that is established for charitable purposes.

Establishing a charitable trust has significant benefits when it comes to paying taxes. Firstly, a charitable entity is exempt from income tax under Division 50 of the Income Tax Assessment Act 1997 (Cth).

Of course, charitable trusts have limited powers and objects so they are limited in that capacity.

Special disability trust

Both immediate family members and carers can establish a special disability trust with the objectives of providing for the future or accommodation needs of an individual with a disability. In these unique circumstances, the trustee is subject to tax at their individual tax rate.

Other key terms

You may encounter several other key terms in the process of establishing your trust. If you are ever unsure about any of them, speak to one of our lawyers today.

Vesting date

The beneficiaries become absolutely entitled to all of the trust’s assets and income when the trust vests, this is known as the vesting date.

Trusts and Taxation

Generally, a trust won’t be subject to tax at the stage of the income being distributed to the beneficiaries. However, the individual must pay tax on that income at their own marginal tax rate. Additionally, in the event a trust undertakes a business enterprise it is eligible to register for GST and its own ABN.

Trust Disputes

Whether they arise during the establishment of the trust or the administration of the assets, our Wills and Estate Lawyers are experienced in managing and settling trust disputes.