What is a Trust fund?
A Trust is a powerful tool that serves multiple purposes and could benefit anyone interested in protecting their finances and future. A Trust can help you manage your property and assets, make sure they are distributed after your death according to your wishes, and save your family money, time and paperwork.
While trusts may seem only for the wealthy, there are actually many benefits to creating them, even if you're not a multimillionaire!
How does it work
A trust fund is a legal entity, like a group, or organisation. It holds assets, such as cash or property, that are intended to provide benefit to an individual, group or organisation. Generally speaking, all trust funds have three important parties:
A person who set up the trust and puts the money, stock, private business or other property such as real estate, mutual funds into the trust and who decides the terms upon which it must be managed.
A trustee can be an individual or an organization, such as a bank trust or a law firm.
The trustee is responsible for managing the trust assets to the trustee while others require the trustee to select qualified investment advisors to handle the money.
A person who in group or organization that is intended to benefit from the asset in a trust.
They do not own the trust property, but have the right to receive the benefit of the property as the trust allows.
Australia recognises a number of trusts, which generally fall into one of the following categories:
・Family Trust funds
It is simple to operate and accepted in every Australian state. A Family Trust is relatively easy to set up to manage, protect, and pass on family assets including shares, personal property, and the family’s business from one generation to another.
・Unit Trust funds
A unit trust is a specific type of trust that divides the beneficial ownership of the trust property into units.
It differs from a family trust in that that generally, the trustee does not have discretion over the distribution of capital or income to beneficiaries.
Distributions must be allocated in accordance to units held in trust.
・Hybrid Trust funds
Hybrid trusts take the best features of a discretionary trust and the best features of a unit trust and blend them in the one entity to create a flexible structure.
Why do people Use a Trust?
A Trust can be set up for a variety of reasons, but often it’s initiated by grandparents or parents for their grandchildren or children and set up a bypass trust to help plan for the future of their estate after they pass away.
The same goes for all kinds of trusts, which, if structured properly under the guidance of an attorney, can come with tax advantages like maximizing estate tax bypasses.
5 Advantages of a Trust
There are several advantages to creating a Trust, including:
・Protecting your personal and business assets
・Trusts remain private, so only the trustees and the beneficiaries know your wishes.
・Providing for distribution over a period.
・Cover property that a will cannot, such as life insurance policies and retirement plans.
・To ensure your property is distributed under the conditions you set.
Trusts have become a common way of structuring financial affairs, and a logical, tax-efficient means to distribute earnings that protect wealth for future generations. You should certainly consult financial and legal professionals before making any decisions.
Dec 05. 2017