As the world slowly starts to see its way through the COVID-19 pandemic, it’s more important than ever to protect your family and your business. In line with this, your financial advisor, solicitor or accountant may have suggested setting up a trust.
While we wrote about setting up Family Trusts in an earlier article, we think it’s important to start at the very beginning and talk about the trust deed. If you don’t get the trust deed right, it can leave you, your family and business open to the very things you hoped to avoid.
In Australia, trusts are legal arrangements used for business and investment reasons. There’s a number of trust structures, each with its own rules, regulations, processes and tax considerations.
The ATO defines a trust as:
A trust is an obligation imposed on a person or other entity to hold property for the benefit of beneficiaries. While in legal terms a trust is a relationship not a legal entity, trusts are treated as taxpayer entities for the purposes of tax administration.
A trust isn’t a person or a legal entity, such as a company. It’s basically a relationship between the trustees and the beneficiaries that is enforceable by law.
A trust owns your assets. As they’re separated from your personal estate, this makes trusts beneficial in protecting:
Depending on your circumstances, setting up a trust can be relatively simple and straightforward. It may also be complex with lots of moving parts. As always, we recommend you seek sound financial advice from a Kelly+Partners team member.
To set up a trust, you’ll need:
The trust deed is the legal document that stipulates how the trust will run and what the trustee can do. It sets out the terms, conditions and rules for the creation and maintenance of the trust. These may include:
The trust deed will be signed and dated by all trustees and implemented according to state and territory laws. Trust deeds should also be reviewed and updated regularly.
As tempting as it may be to cut corners when drawing up your trust deed, not having it professionally crafted and administered can cause the very problems you were hoping to avoid in the first place.
Just a few things a financial advisor, accountant or solicitor can help you with when setting up your trust deed:
While Kelly+Partners can assist with setting up a trust, we do not draft the actual draft deed. The drafting is handled by a lawyer or solicitor. You can use your own solicitor, or we can help you find someone suitable.
A recent case in the Supreme Court of New South Wales has highlighted the value of having access to your original trust deeds. Lost trust deeds are a common issue and while it can usually be settled quickly and out of court, if there’s a dispute or the ATO is litigating, the originals may need to be produced.
Don’t be tempted to set up a trust without a correctly drafted trust deed. By doing so, you put at risk any benefits the trust provides.
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Kelly Partners Private Wealth (Wholesale) Pty Ltd is a corporate authorised representative of Kelly Partners Private Wealth Pty ltd (AFSL: 516704, ABN 14 629 559 860). Any general advice provided has been prepared without taking into account your objectives, financial situation or needs. Before acting on the advice, you should consider the appropriateness of the advice with regard to your objectives, financial situation and needs.
Kelly Partners Private Wealth Sydney Pty Ltd is a corporate authorised representative of Madison Financial Group Pty Ltd (AFSL: 246679, ABN: 36 002 459 001)