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Family Trust

Family Trusts and Adult Children

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A Family trust is a discretionary trusts established to hold a family’s assets or conduct a family business.

The terms and conditions under which a family trust is established and maintained are set out in the trust deed. Trust Deeds are established by the trust’s settlor, trustees are appointed and sign trust deed and the settlor gives the trust property (settled sum) to the trustee.

The benefits of a family trust include:

  • Flexibility on income distributions,
  • Ability to operate a business through the family trust,
  • Provides asset protection,
  • Wealth transfers to family,
  • No age limits to access trust funds, 
  • Ability to hold personal use assets such as holiday homes, boats, racehorses, etc,
  • Minimising tax – trust distributions means lower incomes for tax purposes

Some things to consider before setting up a family trust include:

  • Tax risks – you should always consult a tax accountant before you unknowingly get into any trouble by tax avoidance;
  • The Trustee is the legal owner of the trust and those names will appear on all documentation;
  • Personal ownership of property is lost when managed through a trust; and
  • Additional costs with administration of the Trust over the long-term

Family trusts are attractive structures to operate businesses or hold investments as there is flexibility in who receives the trust income each year. As a result the trustee decides before the 30th June each financial year how that year’s trust income is to be distributed between various beneficiaries.

For the trustee, the overall tax payable on the income distributed to the beneficiaries is an important consideration so generally income will be distributed to beneficiaries in lower tax brackets.

As such, large tax savings can be achieved by distributing trust income to adult children (aged over 18 years) who are either studying or working part-time and are in low tax brackets.

Our team at Gerard Wilkes & Associates are here to help. If you have any questions regarding this article, or would like to discuss your taxation matters further, please contact us at https://www.wilkes.com.au/contact-us/ or call our office 07 5532 1733.

For some further information on Trusts please see the articles at: https://www.ato.gov.au/general/trusts/

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