Thinking about setting up a family trust in Australia? Here’s everything you need to know.

Family Trust (also known as discretionary trusts) in Australia can seem complex, but if you’re unsure where to start, you’re in the right place! While the process might seem complex at first, it doesn’t have to be overwhelming if you follow the correct steps. We’re here to guide you through the entire process, making it as straightforward as possible.

So, let’s dive in!

TABLE OF CONTENTS

1. What is a Trust?
2. What is a Family Trust?
3. Why Are Family Trusts Created?
4. Can a Trust Serve as a Business Structure?
5. Is It Worth Setting Up a Family Trust?
6. Why Would You Set Up a Family Trust?
7.  How Much Does It Cost to Set Up a Trust?
8. Can a Single Person Establish a Family Trust?
9.  Who is a Beneficiary in a Trust?
10.  What Other Types of Trust Structures Are Available?
11. Setting Up a Family Trust: Key Steps
12. Frequently Asked Questions (FAQs)

1. WHAT IS A TRUST?

A trust is a legal relationship in which one party holds property or assets for the benefit of another. Before diving into the specifics of a family trust, it’s essential to understand the general concept of a trust.

Trustee: The individual or entity that holds and manages the trust property.

Beneficiary: The person or persons who benefit from the trust.

Trusts can be an effective way to manage and distribute assets, especially if you run a small business or want to distribute property among family members. While a trustee can also be a beneficiary, they cannot be the sole beneficiary.

2. WHAT IS A FAMILY TRUST?

A family trust is a type of discretionary trust set up for the benefit of family members. The trustee manages the trust property and has the discretion to decide how and when to distribute income and capital to the beneficiaries.

The “discretion” in a discretionary trust refers to the trustee’s power to:

• Decide which beneficiaries receive trust assets.
• Determine how much each beneficiary will receive.
• Flexibly distribute income and capital based on the trust deed.

3. WHY ARE FAMILY TRUSTS CREATED?

Family trusts are often established to benefit family members, but there are several other reasons why you might want to create one:

• Asset Protection: A family trust can safeguard your assets. For example, if the family home is in the trust, you may still live there, but legally, you no longer own the property.
• Protection Against Claims and Creditors: Trusts can protect specific assets from claims or creditors, such as shielding your home from the risks associated with business ventures.
• Tax Planning: Trusts can provide tax advantages by allowing income to be distributed to beneficiaries in lower tax brackets, thereby minimizing the overall tax liability.
•  Estate Planning: Trusts can be used to manage the transfer of wealth, avoid disputes over wills, and ensure that assets are passed down to future generations efficiently.

4. CAN A TRUST SERVE AS A BUSINESS STRUCTURE?

Yes, a trust can serve as a business structure. In this arrangement, the trustee—either an individual or a company—holds the business for the benefit of the beneficiaries. Many choose this structure due to its favorable Capital Gains Tax treatment compared to other business structures like companies.

5. IS IT WORTH SETTING UP A FAMILY TRUST?

Setting up a family trust can be an excellent way to manage family assets, assist with estate planning, and conduct a family business. The decision often depends on your specific circumstances and financial goals.

6. WHY WOULD YOU SET UP A FAMILY TRUST?

A family trust may be beneficial if you want to:

• Protect younger beneficiaries, such as children.
• Manage and protect family assets.
• Distribute income tax-efficiently to beneficiaries in lower tax brackets.
• Provide for family members without giving them direct control over the assets.

7. HOW MUCH DOES IT COST TO SET UP A TRUST?

The cost of setting up a family trust in Australia varies depending on where you set it up and the specific services you require. Costs typically include:

 Establishing the trust.

• Drafting the trust deed.
• Appointing a corporate trustee (if applicable).
• Obtaining an Australian Business Number (ABN).
• Ongoing costs like lodging tax returns and managing the trust.

8. CAN A SINGLE PERSON ESTABLISH A FAMILY TRUST?

Yes, a single person can establish a family trust to manage their assets, investments, and support beneficiaries, such as family members.

9. WHO IS A BENEFICIARY IN A TRUST?

Beneficiaries are the individuals or entities that benefit from the trust. They have the right to be considered by the trustee when trust funds are distributed and may be entitled to trust income or property as specified in the trust deed.

10. WHAT OTHER TYPES OF TRUST STRUCTURES ARE AVAILABLE?

There are several types of trust structures you can choose from, including:

•   Fixed Unit Trust
•   Unit Trust Deed
•   Bare Trust Deed
•    Superannuation Trusts

KEY TAKEAWAYS

Setting up a family trust can provide valuable benefits for asset protection, estate planning, and tax management. Understanding the essential steps—from choosing trustees to paying stamp duty and applying for an ABN—will help you make informed decisions. By taking these steps, you ensure that the trust operates effectively and benefits your family in the long term.