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What is a Family Trust?
In a nutshell, a family trust is a type of discretionary trust which is created for the benefit of a family and its members. A family trust legally owns an asset for the benefit of a person or class of persons.
Why Use a Family Trust?
Some of the advantages of using a family trust are:
- Holding family assets such as a family business
- Protecting assets of a family
- Maximising tax benefits
- Streamlining administrative affairs including tax and allocating family resources
- Streaming incomes based on types and proportions to different family members and/or their companies/trusts
- Family trust is a great tool for estate planning
Who are involved in a Family Trust?
There are 4 key roles that are important in setting up a family trust: the appointer, the trustee, the beneficiaries and the settlor. Let’s dive into each of these roles.
The Appointer
The appointer’s role is to appoint a trustee of a trust. The appointer is generally the person or group of persons who decides decides to set the trust up to begin with. The appointer is the ultimate controller of a trust since they can remove the trustee and appoint a new one where required.
The Trustee
It is important to choose the correct trustee because the trustee(s) has the power to make many crucial decisions of a trust for example they can decide on the amounts of the trust’s net income and capital to distribute to which beneficiaries. The trustee should be someone with integrity, who has good faith and will always act in the best interest of the trust’s beneficiaries. A trustee can be either be a person or a company (corporate).
The Beneficiaries
The beneficiaries are the people who benefit from the trust property. For example the principal beneficiary of a family trust is the person or people setting up the trust and/or their children or close relatives. The general beneficiaries are generally defined by reference to the principal beneficiaries in the deed, for example, their spouse, parents, grandparents, children.
The Settlor
The settlor is someone who signs the deed and settle the trust property. The settlor is required to pay a nominal sum, often $10, to the trustee to formally create the trust. A settlor is generally unrelated to any of the above roles and usually will have no further involvement with the trust after its creation. They can be someone like an accountant/financial adviser or a close friend.
How to Create a Family Trust
Once you’ve identified the people or entities for the above 4 roles, you can either speak to a lawyer or use an online service like Swift Docs to create a legally binding discretionary trust deed. Our online platform will guide you through each step via a user-friendly interface.
Once the trust deed is generated, have it settled and signed by the settlor. The trustee(s) will then hold a meeting to formally agree to be the trustee of the trust. This is documented using the ‘Consent to Act’ letter(s) included as part of Swift Docs’ Family Trust Setup.
The trust deed will then need to be ‘stamped’ by the State Revenue Office in some states. Stamp duty may be payable in certain State and Territory such as NSW and VIC. See table below for an indicative guide:
| State / Territory | Stamping Instructions and Costs |
|---|---|
| NSW | Stamped by a registered OSR lodger within 3 months from execution. $500. |
| VIC | Stamped by a registered Duties Online Agent within 30 days from execution. $200. |
| ACT | Not required. Stamp duty is not payable. |
| QLD | Not required. Stamp duty is not payable. |
| SA | This trust deed is exempt from stamp duty. Stamp duty is not payable. (more info) |
| WA | Not required. Stamp duty is not payable. |
| NT | Stamped via NT Commission of Taxes within 60 days from execution. $20. |
| TAS | Stamped by SRO Tasmania within 90 days from execution. $50. |
Once the trust is established, a Tax File Number (TFN) application should be lodged with the ATO. If the trust runs a business, it should also apply for an Australian Business Number (ABN) with the Australian Business Register (ABR).
The final step is to open a separate bank account for the trust. It has to be in the name of ‘[The Trustee name] as trustee for [The Trust Name]’. The first deposit should be the $10 settled sum before depositing other amounts.
Watch Our Demo
This is how quickly and easily you can set up a trust with Swift Docs.