What is a Discretionary Trust?
A trust is a relationship where someone (the trustee) is under an obligation to hold property for the benefit of another person (the beneficiaries). In a discretionary trust (sometimes called a ‘family trust’), the trustee has the power to determine which beneficiaries receive the property or assets from the trust and how much each is to receive. The discretionary power of the trustee only applies to a nominated class of beneficiaries who are in the trust.
Why establish a Discretionary Trust?
Discretionary family trusts are generally established for asset protection or tax purposes. The main advantages include:
Estate planning for the benefit of members of the “family group” in the event of an unexpected death.
Property held in a trust has legal protection from creditors. A creditor cannot take trust property in bankruptcy or liquidation (unless the debt was originally a trust debt).
Tax minimisation as individuals have a 50% Capital Gains Tax exemption under a trust.
Flexible and easy distribution of trust income and capital.
There are large legal and financial implications to setting up a Trust, and we strongly suggest speaking to a lawyer or accountant before setting up a Trust for your business.
You can discuss this with the team on the Legal & Accounting Advice Plan, or you can seek one-off advice through our Legal Services team here
Create Family Trust Yourself
Use these tools to create Trust yourself:
For more information on Discretionary Trusts and how to set one up, head to our blog post here: https://lawpath.com.au/blog/discretionary-family-trusts