We set up structures to protect your hard-earned wealth.

An individual or business can hold an asset in trust for the benefit of others. Property, shares, businesses, and commercial spaces are frequently held for beneficiaries via trusts. It is crucial to seek professional guidance since misusing a trust may have tax repercussions.

Discretionary trusts, or ‘family trusts’, are commonly used by business owners and assets holders in Australia, to hold a family’s assets and/or business,

to aid with tax planning and safeguard the recipients’ selected assets.

It can be confusing to set up a discretionary family trust. It can be difficult to understand words like trustee, appointor, settlor, and beneficiaries if you’re not familiar with them.

Many small and medium-sized business owners think the same, so you’re not alone.

How does family trust work in Australia?

A typical discretionary trust utilised by business owners in Australia is the family trust.

To hold and administer assets on behalf of family members, a family trust is created.

The family trust is governed by a deed outlining how the trust will operate.

Tax benefits and asset protection are made possible by the trustee’s discretion over the distribution of income and assets to beneficiaries.

This kind of trust is frequently used by business owners to protect their fortune and transfer it to next generations.

For entrepreneurs, what does a family trust mean?

For business owners, the goal of a family trust is to safeguard and manage their assets for the benefit of their kin.

Business owners can move their personal and corporate assets into a family trust, which is supervised by a trustee, thanks to the legal framework that a family trust provides.

This arrangement offers asset protection and tax benefits, allowing the business owner to decide how the trust’s revenue and assets are distributed to their family members.

Family trusts are popular because they allow the trustee to allocate assets and income according to the needs of the family members.

What are the risks of a family trust?

A family trust carries a number of hazards, particularly for business owners.
The possibility of family conflicts and disagreements over asset distribution or trust management is one of the key hazards. Furthermore, there’s a chance that the trust will be managed poorly, which could result in monetary losses or legal issues. Furthermore, relationships and family dynamics might become complex, which increases the danger associated with the trust agreements.

Navigating the complexities of trust elements can be stressful, full of uncertainties and endless questions. We are aware of your uncertainty, anxiety, and desire for clarification.

For this reason, we have simplified these intricacies and endeavoured to lead you through the principal constituents of a family trust (discretionary trust).

Trustee

At the heart of every family trust lies the trustee. This person or organisation is in charge of looking after the assets held in trust.
The Australian Tax Office defines the trustee’s function as fiduciary, which requires them to act in the beneficiaries’ best interests.

Being a trustee calls for a high degree of integrity and a comprehensive understanding of the trust deed and its legal implications. The trustee’s choices can have a big influence on the trust and its beneficiaries, from income distribution to investment selections.

Corporate Trustee vs Individual Trustee:

Selecting a corporation or an individual trustee is a crucial choice when establishing a family trust. Although each option has advantages and disadvantages, the best decision for you will depend on the details of your particular scenario.
In more cases than not, a corporate trustee is recommended. It has a lot going for it, especially in terms of asset and legal protection.

Because the business organisation bears the obligation rather than the individuals involved, a corporate trustee offers an additional degree of legal protection. This can be very helpful should there be legal action.

Additionally, a corporate trustee offers continuity and stability. Unlike an individual, a corporation doesn’t die, become incapacitated, or retire.

This gives the beneficiaries peace of mind and is especially helpful in managing the trust’s assets over time.

Appointor:

The person or people authorised to name and remove trustees are known as the appointor, sometimes known as the principle.

Since they have final say over a family trust, their position is crucial to its management.
They must be named as beneficiaries in order for them to receive any income or property from the trust, though.

Settlor:

The settlor is the individual who initiates the trust by transferring property or assets to the trustee.

Generally, their involvement is limited to the creation of the trust.

The settlor usually has no additional obligations after the trust is established, and they are usually not eligible to receive any benefits.

Beneficiaries:

The people or organisations who stand to gain from the trust property are known as beneficiaries. The trustee may choose to give them capital, income, or both.

The phrase “discretionary trust” refers to the trustee’s authority to select which beneficiaries get payouts in a given year.

Beneficiaries of a family trust are typically other family members and charitable organisations, although they can also be other entities. This provides some flexibility as well as some tax advantages.

In order to make sure these structures safeguard your wealth, we can assist with the setup of the structures and collaborate with your financial advisor. We can teach you financial literacy in areas like asset protection, succession planning, and tax planning to help you accumulate and hold onto wealth.

Income from investments and/or business operations, including capital gains that can be distributed to trust beneficiaries at a reduced tax rate, is included in a trust’s tax features.

Asset Protection Strategies & Business Structure Services:

Keep your assets safe and sound with our asset protection and business structure services. The Titan Tax team consists of the best tax specialists and business tax accountants Australia has on offer. We have a strong understanding of various business structures and the complexities that surround each one, and will therefore be able to ascertain the most profitable business structures based on your situation. We’ll assess which company form will best protect your assets and ensure that your finances expand sustainably by combining our collective knowledge and experience.
We’ll guide you through the processes involved in establishing these structures, and ensure that each entity is set up properly from the get go. Additionally, we’ll offer continuing assistance and guidance to help you run your company and comply with all regulations, protecting your financial future and sparing you from needless expenses or hassles.

Your needs and circumstances will determine the optimal asset protection plan. However, the most effective asset protection plans usually have one essential element in common: separating your assets between your personal and work lives. Your business’s assets, such buildings or warehouses, are kept apart from your personal assets, like real estate, so creditors can’t just take whatever they choose to use to settle accounts.

If you are a small business in Australia, you may be operating as a sole trader or partnership. But for asset protection, these two entry-level business structures don’t offer the security you need to keep business and personal entirely separate. Being a single trader puts your assets at risk since there is no clear distinction between what your business and you personally possess.

While insurance can help reduce certain dangers to your assets, choosing a corporation or trust is the best course of action if you want to strengthen your protection internally. This business structure offers clear separation for your business, leaving your assets out of the picture entirely. If you’re not sure how to change your business structure, speaking to our professionals is an excellent place to start.

Next Steps:

We’re here to help you navigate these complexities. If you need assistance understanding the role of these components in a discretionary trust, our team of experts is ready to help.