Family Trusts
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 and the structure can therefore provide some protection from claims against your estate, claims by creditors, litigants and potential future negligence claims.
A Family Trust is a legal relationship between the holder of the title to property and those entitled to benefit from that property. For example, 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 will enable the family to protect these farming assets and to pass them down from generation to generation in a tax effective manner.
The Trust would be established by a deed with the family members and their direct descendants (for example children and/or grandchildren) as the beneficiaries of the trust.
The farming property, farming equipment and other business assets are transferred to the trust and the capital and income generated by these Trust assets is distributed to the beneficiaries.
The advantages of a Family Trust include:
• They are established for the benefit of all the 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);
• Provides a way to pass family assets to future generations in a tax effective manner;
• Can avoid challenges to the Will of a senior family member.
It is crucial that a Family Trust be established professionally by an experienced solicitor to ensure it meets your specific needs and does not trigger unintended financial or emotional hardship on your loved ones when dealing with trust assets.
A Family Trust (created during your lifetime) differs from a Testamentary Trust which comes into force only upon your death.
A Family Trust is established to benefit all family members.