What is a family trust?
Family trusts

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.
Family trusts

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.

What are the benefits of a family trust?

Some of the potential benefits include:
  • Minimisation of income and capital gains tax.Minimisation of income and capital gains tax.
  • Asset protection.Asset protection.
  • Retirement saving: trusts are an opportunity to accumulate wealth separately from the superannuation environment.Retirement saving: trusts are an opportunity to accumulate wealth separately from the superannuation environment.
  • Trusts have less strict rules than super funds about holding certain assets – for example, it’s easier to invest in property within a trust.Trusts have less strict rules than super funds about holding certain assets – for example, it’s easier to invest in property within a trust.

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.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 (an individual) shouldn’t become a trustee without fully understanding their obligations.The trustee owns and effectively controls the trust, and therefore (an individual) shouldn’t become a trustee without fully understanding their obligations.
  • Set-up costs and ongoing administration costs can be significant.Set-up costs and ongoing administration costs can be significant.
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