FAMILY TRUSTS ? AND ESTATE PLANNING…during your own Life and for your Children…………………NOTE : NB ; IF YOU NEED A NEW TRUST BE VERY CAREFUL ABOUT DOWNLOADING/PURCHASING CHEAP TRUST DEEDS OFF THE NET (WHICH IS WHERE MOST SOLICITORS/ACCOUNTANTS GET THEM...& then charge you extra ?!) SUCH DEEDS WHILE BEEING CHEAP MAY NOT PROPERLY AUTHORISE OR ALLOW YOU OR THE TRUSTEES TO UNDERTAKE THE TYPE OF INVESTMENTS AND OR ACTIVITIES THAT YOU WISH TO...THE CONSEQUENCES CAN BE DIRE ...extra tax and legal invalidity if this happens !!!!
Some Tentative Observations ;
If you are going to give something to your children don't. Instead either loan it to them through a Loan Agreement or prepare an Acknowledgement of Trust or a Declaration of Trust to say that although it is in the child's name it still belongs to you.
Bear in mind that if you want to loan large amounts of money to your children that often a simple loan agreement will not offer sufficient asset protection if they become insolvent…..therefore often you should if possible consider a full blown Registered Mortgage (over land) or at least an Unregistered Mortgage protected by a Caveat Registered at the Land Titles office. This will generally afford a higher level of protection against general creditors of a child that may become insolvent.
Get an Enduring Power of Attorney from your children, in case they lose mental capacity. Get the child to do a Revocation of Power of Attorney if they have given one to their defacto, already. If they have a De Facto persuade them to sign a Binding Financial Agreement with them or if getting married to do a Pre or Post Nuptial Agreement. (i.e. Get your child to do a Co-Habitation Agreement (or if married, a Binding Financial Agreement) where all the assets that you have given them or that you own and they may get in your Will remain with your side of the family. These are legally binding and can override the Family Court and defacto laws. Put assets in a Family Trust and let the parents control the Family Trust.
A Family Trust (also called a Discretionary Trust) is one of the most common small business structures in
The Family Trust structure is useful if your family holds capital growth or income-generating assets. Some of the key attributes of the Family Trust are:
•Prepared for asset protection purposes. It helps protect from bankruptcy and insolvency
•It is a relatively low cost and simple structure to use
•It allows you to distribute income to family members who are on low tax rates
•It allows you to “stream” income: you can distribute one type of income to one person and another type of income to another person (provided your trust deed is written /upgraded properly)
•Works in every state of
A Family Trust can operate for up to 80 years.(forever in
Family Trusts have many benefits, including lower tax rates,flexibility and a way to distribute income/earnings in the most tax efficient manner..........(Superannuation by contrast is less simple and costs much less to run in most cases and generally has a clear outcome...........).
Trusts unlike Super' have no set contribution limits, no restrictions on where you can invest and no borrowing limits unless this specified by the Trust Deed
The trustee is the legal owner of the trust property, although not the beneficial owner, and is responsible for managing the trust fund.(arranging tax ,investment Management etc)
The trustee’s overriding duty is to obey the terms of the trust deed. The trustee also has a duty to act in the best interests of the beneficiaries. There are many other duties imposed on the trustee by law.
As the trustee is personally liable for the debts and transactions they undertake on behalf of the trust, best practice is to use a company as trustee, for the following reasons:
it is easier to effect changes of control;
a company never dies; this saves the expense of transferring assets to new trustees on the death or retirement of the existing trustees; and
the company will have no significant assets of its own (if its only role is to act as corporate trustee) which could be exposed to the creditors of the trust (however, the directors may be personally liable in certain circumstances).
It is generally preferable for different trusts to have separate trustees.