Family Trusts have been in the news quite a lot lately.
They've been delved into at ICAC hearings, publicly squabbled
over in court by super rich families and the Tax Office tries to
get its mits on the money they hold.
But despite all that, Family Trusts - or Discretionary Trusts as
they are also called - are still a great way to protect your
family's wealth and are valuable for small businesses.
Trusts have been around since the time of the Crusades when
lords and knights wanted to keep their castles out of the hands of
the taxman or crooked relatives while they were away fighting in
the Holy Land.
A Trust is an agreement where a person or company agrees to hold
an asset for those nominated to benefit - usually a family. It can
include anything from properties, shares, cash, a farm or business
to works of art and inventions.
Commercial lawyer Tony Mitchell says there are many advantages
to forming such a Trust including long term financial security, tax
minimisation and protection for family members who need financial
assistance for some time.
"They are very useful in protecting family assets, but you
need sound legal advice when setting them up to ensure you achieve
what you want," Mr Mitchell from Stacks/The Law Firm said.
"Laws relating to Trusts are subject to change so you need
to make sure you have expert advice to stay on top of any legal
When you transfer your assets into a Trust you no longer own the
assets in your own name. They are controlled by a Trustee, but when
you set up the fund you set out how they are managed and how they
distribute funds to beneficiaries.
Let's say the Trust buys a property. Any income from that
property belongs to the Trust. The Trust can minimise tax for the
family by distributing that income to beneficiaries such as members
of the family who have low income, therefore pay low or no tax.
The other main benefit is that assets held by the Trust
generally can't be reached by creditors. Courts and Treasury
love trying to get at assets held by the Trust structure, so
it's important to make sure they are drafted correctly and kept
up to date with any changes in laws and regulations.
"There are many complex technicalities in having a Trust
which, if you are not careful, can land you in trouble, so it is
vital to have expert advice," Mr Mitchell said.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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