A family trust is a specific type of trust that families can use to create a financial legacy for years. There are several benefits to creating one, including ensuring your family members receive your wealth and avoiding public disclosure of trust assets. Trusts are used to manage estate taxes, shelter assets from creditors and pass on wealth to future generations.
Benefits of a family trust
Family Law trusts provide a clear way to pass money, property, and other assets to your family members. That’s an advantage in and of itself. You can dictate what each beneficiary gets and when they get it.
The main advantage is that people do not have the opportunity to challenge the terms of the trust in the same way that they can contest the terms of a Will. Your chosen trustee will distribute trust assets according to the wishes you laid out in the document.
Family trusts may also provide tax benefits to enable the family group to manage the tax of the family unit. This can be particularly helpful in supporting adult children who are studying or older parents who are retired as they are likely to be in a low tax bracket.
Retaining assets within a family group can also be a motivator for holding assets in a trust, for example, a family farm.
Note: If you avoid probate by using a trust, then you can also protect the privacy of your estate holdings. Trusts are usually not public record the way wills are.
Who’s involved?
- A settlor/grantor: The person or company who creates trust.
- Trustees: The people who manage the trust. The settlor can also be a trustee. It’s also a good idea to appoint an independent trustee who is not a relative. Professionals, like lawyers often act as independent trustees.
- Beneficiaries: The people who benefit from the trust, e.g., family members.
Setting up a family trust
Family trust process is straightforward, though the exact structure of it is best determined by seeking advice from both accountant and a family lawyer in Melbourne.
While the type of trust you select will have an impact on the specific terms and conditions of the trust, the following are the basic steps you will usually need to go through to set up your family trust:
- Choose your trustees and beneficiaries
- Draft the trust deed
- Transfer assets into the trust
- Trust stamping
Depending on your choice of trust, you may want to consult with an estate planning attorney when setting up your trust. In addition to relying on their knowledge of the various terms and conditions which can be implemented in your trust, they can provide invaluable assistance in helping you to transfer assets into the trust properly.
The family trust is simply any trust vehicle that’s set up to benefit your family members. Because of this, the features of the trust you create in your estate plan will depend primarily on the type of trust vehicle you choose.
Getting advice
In conclusion, there are a few things to think about when establishing a family trust. They are great investment vehicle and provide tax minimisation across a family group.
As mentioned above, trusts should usually be formed by a Family Law lawyer or a professional trustee company. Family trust can be quite technical, so we’ll typically need legal expertise.
Good advice on trusts is important. Get professional advice right from the start. If you have any questions along the way, you can contact us at any time.