Do I need a Family Trust

insight

What is a Family Trust?

 

You may have heard of family trusts at a friends birthday party or at the dog park.  What are they? and how can they be useful?  Here in Australia, a trust can be a significant vehicle to assist in building your wealth.

There are many types of trusts and which one you should choose depends on many factors. Such as the type of investment, whether you will require a loan, your marriage status and your susceptibility to being sued. The most common type of trust thought is a discretionary trust. Or commonly known as a family trust.

Basically a family trust is a vehicle to accumulate investments that are protected. With the profits distributed in the most tax-effective way. A family trust allows the trustee to use their discretion in distributing funds to the beneficiaries. This is where the real value of a trust can occur.

 

Here are five benefits of using a trust to manage family wealth:

Asset protection

A trust can be used to keep the wealth in the family. Where a parent might want to buy a house for their child, using a trust will allow the child to live in the house with the ownership sitting within the trust.

If there were potential issues with an in-law, the trust structure assists in potentially keeping the property outside of the marital asset pool.

 

Cost effective

The cost of establishing a family trust is relatively low.  A trust generally can cost between $1200 and $2000 in legal documentation. Accounting fees can vary between $800 and $2000 each year.

 

Tax minimisation

Trust distributions can be directed to family members on lower tax rates, potentially saving you thousands of dollars in tax.

If purchasing a property for a child, this effectively becomes a rental property. This allows the trust to claim expenses in the same way that a landlord can for a rental property. Keep in mind though that buying a property in a family trust does not qualify you for the first homeowners grant or stamp duty concessions.

 

Retirement planning

While the superannuation rules continue to change, a trust provides a flexible structure to accumulate long term wealth with tax benefits. Consider accumulating funds both in your super fund and also within your trust. Unlike your superannuation fund, your trust doesn’t have any rules about when you can access the funds. This can provide for an early retirement prior to gaining access to your super fund monies.

 

Flexible and estate planning

Most family trust deeds are flexible in their operation and can provide for good estate management. This can allow assets to benefit generations without the need for ownership to change from one individual to the next.

It’s no surprise that trusts are a popular way to accumulate money, and to protect assets and keep it in the family.

 

If you’d like to talk to us about the suitability of a trust for your family and potentially start gaining the benefits that trusts allow, feel free to contact us here: I’d like to know more.

 

– 10 March 2021 –

 

General Advice Warning
In preparing this article, Praescius Financial Consultants NSW Pty Ltd, Praescius Financial Consultants NT Pty Ltd, Praescius Financial Consultants HB Pty Ltd and Praescius Financial Brisbane Pty Ltd have not considered your personal circumstances, goals or objectives; as such the information, commentary and assertions made within this article may not be suitable to you.  Please seek personal financial advice prior to acting on this information, or making a decision regarding the choice of a financial product or strategy. Further information and disclosures can be found in our Financial Services Guide or by contacting us on the phone numbers provided.

Praescius Financial Consultants NSW Pty Ltd, Praescius Financial Consultants NT Pty Ltd, Praescius Financial Consultants HB Pty Ltd and Praescius Financial Brisbane Pty Ltd are authorised representatives of Praescius Financial Holdings Pty Ltd ABN 14 610 960 980 AFSL 486455, 2a/57-59 Oxford Street, Bulimba Qld 4171.

Share
More from insight in action

Future, meet insight.

Future, meet insight.