What are the advantages of a Family Trust?
A Family Trust is an arrangement whereby certain assets are held on trust by a trustee (or manager) on behalf of a group of people (usually specified family members) known as beneficiaries. Neither the trustee nor the beneficiaries actually “own” the assets (in the sense of having full entitlement to use the assets for their own benefit) and the structure can therefore provide some protection from claims against your estate, claims by creditors, litigants and potential future negligence claims.
In circumstances where a family farming property, valuable farming equipment and other business assets are involved, it is common for a Family Trust to be established. This may enable the family to protect these farming assets and to pass them down from generation to generation in a tax effective manner.
A Trust is usually established by formal document called a deed, often with key, named family members and their direct descendants (for example children and/or grandchildren) as the beneficiaries of the trust.
Assets held in the trust, and the capital and income generated by the trust assets, can be distributed to one or more of the beneficiaries.
The advantages of a Family Trust can include:
- The potential to benefit of a range of family members;
- Can provide tax advantages;
- Can protect the family group’s assets from the actions or liabilities of one family member (for example, if that family member becomes bankrupt);
- sometimes provides a way to pass family assets to future generations in a tax effective manner;
- may assist in reducing the likelihood of a successful challenge to the Will of a senior family member.
It is crucial that a Family Trust is established properly, by an experienced solicitor, to ensure it meets your specific needs and does not result in unintended financial or practical hardships for your loved ones.
A Family Trust, which is created by a trust deed during your lifetime, differs from a Testamentary Trust, which is created by your Will, and comes into force only upon your death.
A Family Trust can help manage your family’s assets for the benefit of a range of family members.
