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How to get a Trust Set up

Why Set Up a " Family Trust " or  a Trust in General ?

-Two Reasons -

(1) Protect your property and money in the event you ever get sued (ie proceedings brought against you in a Court)

(2)  To reduce tax exposure in any Jurisdiction (location) including Australia.

 For further details Please see

Questions -Old Trust Deeds

Key Questions - What to look out for in "older Trust Deeds" and in the simple cheap Trust Deeds that can be downloaded on the Internet...............

Checklist ?  Tax &  Legal /Estate Planning Issues to Look for in a Family/Discretionary Trust Deed



Why This Is Important:

1.   Is the Perpetuity Period Valid? (Time Period)

If not, the trust is void, with dire consequences, e.g. all trust payments/distributions from inception of the trust may be void. Trusts last (only) 80 years in NSW as long as you like in South Australia

2.       Are there any Default Beneficiaries?

        *Do the Trust provisions allow succession via your Will ?

If there are Default Beneficiaries (esp. as to Capital) then:

The trust assets may be subject to their creditors in bankruptcy;

     Any changes to them may result in a partial or full CGT / stamp duty resettlement.

-    *If your Trust Deed does not allow new Trustees to be appointed by your Executors under your will what happens when the Trustees die ?

3.       Definition of Income:

      Is there a Discretion to determine accounting income v tax income?

     This is necessary to ensure that where the taxable income is different from the trust income:

Tax is paid by the beneficiaries who will actually receive that income (e.g. so taxable capital gains can be recognised as ?income? and distributed to those who will pay the tax on it);

      -non-trust, taxable income can be distributed rather than accumulated and taxed at the top tax rate of 46.5%.

4.   Income and Capital Streaming:

-     Can the trustee separately identify, record & distribute taxable capital gains or other categories of income & capital?

      If not, then all categories of income will be taken to be distributed pro-rata to all beneficiaries to whom income is distributed ? so that tax advantages associated with different types of income may be lost because it cannot be ?streamed? to a particular beneficiary (e.g. franking credits).

5.The Trustee:

When is office vacated?

How to replace, appoint?


      If there are no provisions providing for the automatic disqualification from office of the trustee in the event of its bankruptcy or insolvency (or in the event of legal or other disability of a majority of the directors or shareholders of the trustee) then potentially the Trustee in Bankruptcy may take control of the trust and make distributions to a bankrupt beneficiary to satisfy its creditors.

The power to replace or appoint a trustee often determines who has ultimate control over the trust.

6.   Any Trustee Indemnity from trust assets? (esp. where corporate trustee)

If so, then it is important for the indemnity to be limited to the trust assets and not permit recourse to the beneficiaries themselves, otherwise they could be personally liable for trust debts.

7.       The Appointor:Person who appoints Trustees.


When is office vacated?


How to resign, replace, appoint?

If there are no provisions providing for the automatic disqualification of the Appointor in the event of the appointor?s bankruptcy or other legal disability, potentially the Trustee in Bankruptcy could take control of the trust depending on legal interpretation (see the Richstar case)

If there are no provisions providing for the resignation, replacement or appointment of the Appointor, then if something happens to them and to the trustee, control of the trust may ?fall into the wrong hands?.

If there are no provisions dealing with the exercise of the powers of appointment where there is more than one Appointor, then in event of disagreement the Appointors may need to seek the Court?s advice, which is costly.

8.      Power to Amend the trust deed?


9.  Succession in the Trust Property -

If no power to amend the Trust deed, then the trust deed may not be able to be amended without seeking Court approval (e.g. to update it to allow income streaming).


Does the Trust Deed Provide for who is to receive the benefit of trust property and what shares once the current main beneficiaries die etc ? *A Will cannot do this adeqately

Why a Family Trust ?

FAMILY TRUSTS  ? AND ESTATE PLANNING…during your own Life and for your Children…………………


Some tentative observations ;


If you are going to give something to your children  don't. Instead either loan it to them through a Loan Agreement or prepare an Acknowledgement of Trust or a Declaration of Trust to say that although it is in the child's name it still belongs to you.


Bear in mind that if you want to loan large amounts of money to your children that often a simple loan agreement will not offer sufficient asset protection if they become insolvent…..therefore often you should if possible consider a full blown Registered Mortgage (over land) or at least an Unregistered Mortgage protected by a Caveat Registered at the Land Titles office. This will generally afford a higher level of protection against general creditors of a child that may become insolvent.


Get an Enduring Power of Attorney from your children, in case they lose mental capacity. Get the child to do a Revocation of Power of Attorney if they have given one to their defacto, already. If they have a De Facto persuade them to sign a Binding Financial Agreement with them or if getting married to do a Pre or Post Nuptial Agreement. (i.e. Get your child to do a Co-Habitation Agreement (or if married, a Binding Financial Agreement) where all the assets that you have given them or that you own and they may get in your Will remain with your side of the family. These are legally binding and can  override the Family Court and defacto laws.  Put assets in a Family Trust and let the parents control the Family Trust.


A Family Trust (also called a Discretionary Trust) is one of the most common small business structures in Australia. Unlike, say a Unit Trust, you establish a Family Trust to benefit the members of a family. Family Trusts provide families with a great deal of flexibility in sharing the tax burden among family members and protecting family assets.


The Family Trust structure is useful if your family holds capital growth or income-generating assets. Some of the key attributes of the Family Trust are:

•Prepared for asset protection purposes. It helps protect from bankruptcy and insolvency

•It is a relatively low cost and simple structure to use

•It allows you to distribute income to family members who are on low tax rates

•It allows you to “stream” income: you can distribute one type of income to one person and another type of income to another person (provided your trust deed is written /upgraded properly)

•Works in every state of Australia and Over seas


A Family Trust can operate for up to 80 years.(forever in South Australia)