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Trusts are set up through a document called a trust deed. It is an agreement between two parties, for one party to hold another parties asset to the benefit of another party. This type of arrangement has many advantages for tax planning, asset protection, privacy and the delegation of day-to-day responsibilities.
There are four key roles to many trusts; these include the trustee, appointor, beneficiary and settlor. The trustee's purpose is to look after the assets within the trust. The appointors role is to hire and fire the trustee. The beneficiaries are entitled to the assets in the trust. The settlor is an archaic role to help with the formation of the trust. A natural person or a company can do these roles.
A trust in Australia is set up through a settlor getting a solicitor to draft a trust deed. This document nominates the trustee, and if the trustee is a company, it will need to be formed. Then the settlor pays a nominal amount into the trust while executing the trust deed. Then the trustee can start the books for the trust, and the trust is now operational.
There are many different trusts in Australia which includes: Unit Trust, Discretionary or Family Trust, SMSF, Testamentary Trust, Bare Trust, Hybrid Trust, Charitable Trust and Fixed Trust.
These different types of trusts can have a range of uses which include:
Reducing your borrowing risk while accessing the 12m CGT discount.
Minimising any financial loss in lost litigation against you in your personal capacity.
Protecting inherited assets to your kids (instead of a divorcing spouse).
Investing in a Family Trust structure to allow investment returns to be paid to a lower-income earning family member.
A small business owner can income split with their spouse.
A unit trusts can be used to own assets with other people.
Trusts also assist with estate planning.
Read More
By: Kent Cliffe
Title: Trusts Explained Australia: Reduce Tax + Boost Asset Protection (Inc. Family Trusts Australia)
Sourced From: www.youtube.com/watch?v=4d_NwfLvlmw
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