What is a
family trust?

A family trust is a way of owning assets. It is a legally created ownership structure where an individual or organisation (a ‘trustee’) manages certain business assets or investments that it holds for the benefit of other people, such as family members (‘beneficiaries’). Most family trusts are established for asset protection and tax purposes.

What are the benefits
of a family trust?

Some of the potential benefits include:

What are the
drawbacks?

  • It is more complex to make arrangements for the assets held within a family trust to be passed to your beneficiaries when you die (you can’t leave assets held in a family trust to a specific beneficiary in your will)
  • Losses incurred by investments within a trust can’t be offset by the beneficiaries against their other taxable income
  • The trustee owns and effectively controls the trust, and therefore (if an individual) shouldn’t become a trustee without fully understanding their obligations
  • Set-up costs and ongoing administration costs can be significant.

Should you create
a family trust?

While you don’t need hundreds of thousands of dollars in assets to create a family trust, they’re definitely not for everyone. Very generally, trusts are less suited to salaried employees within the pay as you earn (PAYE) tax system, but can be worth considering for families with business interests or diverse and complicated investments.

If you’d like to learn more about whether it might be appropriate for you to create a family trust, a Fiducian financial planner is a good place to start. They can assess your personal and family situation to determine whether it’s worth exploring further, and help you get the right legal help if you decide to proceed.

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