Discretionary trusts

WHAT IS A DISCRETIONARY TRUST?

A discretionary trust is a structure that is commonly used to:

  • allow for easy distribution of trust income and capital, and
  • allow for distribution of funds to beneficiaries at the discretion of the trustee
  • protect or ’quarantine’ assets from creditor attack

WHAT IS A TRUSTEE?

The trustee has the responsibility of running the trust, along with the distribution of trust income and capital.

The position can be held by one or several people or a company.

Any assets held by the trust are held in the name of the trustee, in its capacity as trustee of the trust.

A trustee may at any time resign by serving its resignation to the appointor.


WHAT IS A SETTLOR?

A settler is only involved with a trust when it is being established.

The settlor invites the trustee to accept the position of trustee. After this, the settlor will gift a nominal amount (the Settled Sum – typically about $10) to the trustee to establish the trust.


WHAT IS AN APPOINTOR?

The appointor is ultimately in control of the trust.

The function of the appointor is to appoint and resign the trustee after the trust has been established, thus ensuring a level of accountability over the trustee.

The position is a non-essential one, but is generally included to give that extra protection and control over the trust / trustee.


WHAT IS A BENEFICIARY?

A beneficiary can be:

  • a person (including a minor)
  • a company
  • the trustee of another trust
  • a charity / church, etc.

The basic description of a beneficiary is any entity who receives any distribution of income or capital from the trust fund by the trustee.

There are typically two types of beneficiary to a trust:

Primary beneficiaries

A primary beneficiary is any entity that is named in the trust deed when it is created. These are entities specifically nominated to receive trust funds from the trustee.

Beneficiaries (general)

A beneficiary is typically a related entity to a primary beneficiary and can include grandparents, parents, siblings, children, stepchildren, grandchildren, nieces and nephews, cousins, etc.

This also includes any of the above related to the spouse of a primary beneficiary.

The trust deed also allows, by default, any further trusts (including superannuation funds) and companies associated with any of the beneficiaries, along with employees of the trust and charities, churches, etc to be a beneficiary.

2018-04-26T11:01:33+00:00

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