Simple questions regarding family trusts

Discussion in 'Wealth Creation & Management' started by johnw, May 30, 2013.

  1. johnw

    johnw Member Silver Stacker

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    As a single person aged approx 30 with a dwindling immediate family, is there an easy route to establishing a family trust for just a sole person? (most of my experiences surround SMSF)

    Who would you commonly allocate as a beneficiary in this instance? (friends, dog)

    Are you required to allocate benefits to these people?

    Can I roll my incorporated SMSF into the family trust and are there any benefits to this?

    I'll take the plunge in a few weeks, I just want to go in well informed.
     
  2. willrocks

    willrocks Well-Known Member Silver Stacker

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    In my experience most banks want to see the beneficiaries named in the trust document before they open an account. In my case ANZ was OK with "The children of <NAME>". So that may rule out the family pet if you want a bank account.
     
  3. boneyard

    boneyard Well-Known Member Silver Stacker

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    Who do you get to set up a family trust?

    Do you need to transfer property title at what cost?
     
  4. hiho

    hiho Active Member Silver Stacker

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    calling NR
     
  5. johnw

    johnw Member Silver Stacker

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    A solicitor or accountant would be best

    From what I understand, transferring a property to a trust after purchase will incur stamp duty and possibly CGT, hence the reason I am wanting to establish one before I purchase a house.
     
  6. AngloSaxon

    AngloSaxon Active Member

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    Good for you for wanting to get into this. I am no expert but like exploring these issues.

    Depends on whether you want a unit or discretionary trust. A unit trust, simply explained, will have unitholders who should take all the profits/revenue of the trust as per the Deed. A discretionary trust allows you to name a person, persons, class of person etc, another trust if you have the best advice etc as beneficiary. You can even declare one beneficiary entitled to revenue and another entitled to capital gains, depending on what you want to do.

    You are not required to allocate 100% of benefits, however the Trust or Trustee then bears a punitive rate of tax as a penalty for trying to avoid tax, so that's not really meeting the aims of opening a Trust. Friends, sure, allocate them as beneficiaries but is that really your plan? A Trust is a valid way of giving to charities etc as beneficiaries in certain situations.

    If you get good advice you may work something out where a Trust could be held for a class of beneficiaries being future children, but you can't avoid the punitive taxes for not allocating revenue to a beneficiary.

    The same real person can act as Trustee for both a SMSF Trust and a Family Trust, but as you know the rules of super trusts are clear that assets must be kept separate from personal assets and that Trust must be run in accordance with the sole purpose test. I believe, but don't take this as advice, the SMSF and Family Trust could co-invest in the same assets such as residential property or real business property but to do so would be complex and require professional advice and vetting by a financial planner and an accountant who knows what they are doing.

    As stated by hiho, NR is the resident expert on Trusts. Depends on whether he sees this, he said he would be preoccupied with a new business opportunity and since then I haven't seen him.

    What do you want to achieve with a Family Trust if your family is diminishing? Have you considered negative gearing in a property portfolio if all you want to do is minimise your tax?
     
  7. AngloSaxon

    AngloSaxon Active Member

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    And yes transfer to a Trust after ownership commences will incur Stamp Duty and CGT as technically you as a natural person are transferring ownership to someone else, in this case the legal fiction of the Trust.
     
  8. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    I know next to zilch about Trusts, but one thing I remember reading (I think :lol: ) is that if you are setting up a Trust structure to "enhance" your financial position, it is more costly (Government charges duties etc) to do so if you already own the capital assets. By that I think if you are considering purchasing investments, it may be better to have the Trust structures in place before you purchase, in that way the trust makes the purchase rather than, as AS said, you having to transfer assets to that Trust.

    In other words, simply put, if you already own the assets it may be of no benefit to establish a Trust that will take ownership of something you already personally own. Use it to purchase new assets.
     
  9. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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