Set up a discretionary 'family' trust

This interview will assist you in generating documents allowing for the establishment of a discretionary 'family' trust (the 'Work').

Terms of use

Before proceeding, we note the following terms of service:

The Work (what's included)

  • Trust deed establishing a 'standard family trust'
  • Accompanying trustee resolution
  • Template trust distribution resolution (for consideration by your tax advisor)
  • Sample trust resolution wording for common transactions (for consideration by your legal advisor)
  • Cover letter including a seven (7) page summary of a 'standard family trust' and next steps to open a bank account for the trust

Service Agreement

  • Our Service Agreement can be found here.
  • By submitting your instructions through this interview, you (or the entity you represent) agree to be bound by the Service Agreement with Chat Legal Pty Ltd ABN 64 621 391 553 (Chat Legal).
  • Use and the provision of instructions through this interview constitutes electronic communication of the Work you engage Chat Legal to undertake.
  • Our Work is limited to the items listed above and does not include any tax or legal advice.
  • Separate tax and legal advice can be provided for an additional fixed price.
  • We have provided general information relating to the Work in this interview to assist you, including listing some issues to consider.
  • Our fixed price to undertake the Work is $160 (GST inclusive).
  • A tax invoice will be issued at the time of providing the documents to you on 14 day payment terms.

Privacy and use of personal information

  • Chat Legal respects your privacy.
  • Please take the time to read our privacy policy here to understand how we deal with any information collected.
  • Any personal information you provide to enable Chat Legal to generate the required documents will only be used for that purpose.
  • If you do not want your personal information disclosed or used in any way by Chat Legal, please contact our Director, Darius Hii at darius@chatlegal.com.au. We may be unable to act for you in this case.

If you have any queries in relation to the above terms of use, please feel free to contact our Director, Darius Hii at 0403 923 374 or darius@chatlegal.com.au.

Process

Below are the steps required to undertake the Work:

  • Complete this interview - useful information and tips will be provided throughout to assist you in answering the questions. Please ensure you carefully check your instructions prior to submission.
  • Provide contact details - please ensure the information you provide is correct otherwise the Work may not be provided to the correct email address. You will also be able to provide us with background information or questions to consider. If reasonable, we will consider such information as part of our review. If not appropriate or if we identify potential concerns, we will provide you with some suggested next steps.
  • Review by specialist lawyer - upon submission, a specialist lawyer will review your instructions and (provided no concerns or issues identified) arrange for the Work to be finalised within one (1) business day of receipt of instructions.
  • Receive finalised documents - once reviewed, you will receive the finalised Work by email with (if relevant), ancillary comments relating to any background information or questions you have provided. A tax invoice will also be provided that this step.
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    Overview and some issues to consider

    Some issues that should be considered in relation to structuring a discretionary trust are provided below (although the list is not exhaustive):

    • What's the intended purpose of the discretionary trust?
    • Whether the use of a discretionary trust for the purpose is appropriate or would a company be better suited?
    • How should the discretionary trust be structured? Does it need to be structured to reduce unnecessary liability arising for relevant persons?
    • Are there any tax issues, particularly where non-residents are in key roles in the trust?
    • Has the broad trust law requirements and trust compliance issues been understood such as the rights and obligations affected under the trust document.

    While we will provide you with a broad summary of what should be considered, we reiterate that the use of trusts can be complicated due to the various areas of law affecting them.

    If you would like us to advise you regarding the structuring of the trust, please contact us at letschat@chatlegal.com.au and we can provide you with a fixed price quote to assist.

    What is a trust generally?

    As a general overview, a trust is a relationship where:

    • someone (called the 'Trustee')
    • holds assets (the property of the trust, or 'Trust Property')
    • for the benefit of other people (called the 'Beneficiaries').

    The effect of this relationship is that the Trustee legally owns assets, however, any benefit arising from those assets can go to other people (such as the Beneficiaries).

    The term 'discretionary' trust arises due to the fact that the Beneficiaries of this trust are discretionary.

    Specifically, the Trustee has the discretion to decide which Beneficiaries are able to benefit from the Trust Property.

    As the Trustee legally owns the assets, the Trustee is also generally responsible for such assets (and any contracts or agreements arising from such assets). It is therefore, important to appreciate that issues arising from those assets may affect the Trustee personally.

    Care must therefore be taken in relation to who should act as the Trustee for the trust.

    Who can benefit from this trust?

    As outlined above, the Trustee will manage the trust for a group of people called the Beneficiaries.

    In the trust that will be established, the 'Beneficiary' class will include the following persons:

    • a specifically named person (or persons) ('Primary Beneficiary');
    • a Spouse of the Primary Beneficiary;
    • any Parent, Grand-Parent, brother or sister of the persons mentioned above;
    • any Children, niece or nephew of the persons mentioned above, and their Lineal Descendants;
    • any Spouse of the persons mentioned above;
    • the trustee of any trust which any Beneficiary is a member of a class of beneficiaries named in that trust, or holds units in that trust;
    • any company that a Beneficiary, or this Trust holds any type of share or is a director in that company;
    • the personal representatives of the deceased estate of any Beneficiary;
    • any person who is employed or engaged by the Trustee of this Trust in the course of any business or activity carried on by the Trustee of this Trust;
    • any charity or religious entity; and
    • any person or entity appointed as a Beneficiary under the terms of the trust document.

    We note again that it is the Trustee who decides from the above class of people can benefit from the assets of the trust, and note that no person who falls within the beneficiary class can ever force the Trustee to make a payment to them under this trust.

    Creating the trust

    In Australia, a person called the 'Settlor' is required to create a discretionary trust.

    The sole purpose of the Settlor is to provide the person managing the trust (the Trustee) with an initial sum of money, thereby creating a trust.

    Because a trust is a relationship where the Trustee holds assets for the Beneficiaries, the Settlor can only create a trust if there is some money in the trust when created ('generaly called the 'Settlement Sum'').

    This Settlement Sum is usually $10.

    It is required from a taxation perspective that the Settlor does not benefit from the trust, so we strongly recommend the Settlor be unrelated to any persons involved with the trust.

    Usually, an accountant or lawyer will act as the Settlor for the trust.

    We do not act as Settlor for trusts unless we are providing the tax and legal advice relating to the establishment of the trust. If you would like our tailored tax and legal advice in relation to the establlishment of the trust, please contact us and we can provide you with a fixed price to assist.

    The Trustee

    As mentioned above, the Trustee is the legal owner of the assets of the trust.

    The Trustee can be one or more individuals and/or companies, with a maximum limit of four Trusetes appointed at any one time.

    If there are more than one entities acting as Trustee, it is important to review the trust deed to confirm how those Trustees should act. Absent of anything contrary, Trustees would be prudent to act jointly given they are all liable for the assets of the trust. The trust deed generated will require multiple appointed Trustees to act jointly.

    Before providing us with the information on who you would like to act as a Trustee for the trust, please consider any potential risks arising from the trust and ensure the appropriate persons are appointed to act as Trustee.

    Please note that this trust can only either appoint:

    • one or more individual Trustees; or
    • a sole company acting as Trustee.

    This trust is unable to be established with a mix of individual and company Trustees as that is a very rare scenario.

    The Beneficiaries

    As outlined above, The Trustee will manage the Trust Property for the benefit of others, being the Beneficiaries.

    Given this trust is a discretionary 'family trust:

    • the Trustee will also have the power to decide which Beneficiaries can benefit (and in such proportions as the Trustee decides);
    • the main Beneficiaries will also be limited to family members; and
    • none of the discretionary beneficiaries will have any entitlements to anything in the trust unless the Trustee decides otherwise (i.e. none of these Beneficiaries can force the Trustee to make a distribution to them).

    You will recall seeing that the Beneficiaries of this trust largely includes members of a family group.

    This family group is built upon a named 'Primary Beneficiary' (whether one or more), so please consider who you would like to be named as the Primary Beneficiary/ies of the trust.

    The Primary Beneficiary may also be the Trustee, but is not recommended.

    You may wish to name more than one person.

    Excluded Beneficiaries

    This family group is built upon a named 'Primary Beneficiary'

    We strongly recommend you obtain specialist advice to understand such issues if it may be relevant for you.

    We are able to generate a 'non-foreign' trust by excluding all foreigners as a beneficiary of the trust.

    While doing so will ensure the laws affecting 'foreign trusts' do not affect you, it will reduce any potential Beneficiaries of the trust to only those who ordinarily reside in Australia.

    The Appointor

    For maximum flexibility in the control and estate planning for your trust, the trust also includes one further role called the Appointor.

    While the Trustee will have legal ownership over assets and be responsible for manaing those assets, the Appointor will have the ability to change the Trustee at their own discretion.

    This is particularly useful in allowing an individual to remain in control of the trust even if the Trustee is a company.

    It also allows the day to day control to be delegated to appropriate persons, while the ultimate controller (the Appointor) remains away from the risk of being a Trustee.

    It is common for an Appointor to be one or more individuals. From an estate planning perspective, it is this role that is critical in ensuring the right people take control of the trust.

    Please consider who should fulfil this role.

    Instructions

    Please check your instructions carefuly prior to submitting. Additional costs may apply to correct any errors.

    We confirm that by continuing to instruct us, we act for you (the Advisor) and not on behalf of your client.

    What would you like the name of the trust to be?

    When was the trust intended to be established (and if a historical date, is there sufficient evidence of such intention available)?

    Who is acting as Settlor for the trust? The sole purpose of the Settlor is to provide the person managing the trust (the Trustee) with an initial sum of money, thereby creating a trust. This person should ideally be an unrelated individual to the people who are benefiting from the trust.

    Please provide us with the address of the settlor.

    How much money is the settlor providing to the Trustee to create the trust? (Usually $10).

    What laws will govern the trust? These will generally be determined based on where the Trustee or the assets of the trust are.

    Please provide us with the full legal name and address of each Trustee of the trust. Where the Trustee is a company, please provide us with the names of any directors who will be signing on behalf of the company.

    Please provide us with the full legal name and address of each Appointor of the trust.

    Please provide us with the full legal name and address of each Primary Beneficiary of the trust. Please note that the trust will be established with a beneficiary class, being the family members and associated trusts and companies of the above Primary Beneficiary.

    This is crucial in determining whether Foreign Investment Review Board approval is required prior to the trust acquiring real estate; or potential tax surcharges being applied against the trust in the event the trust acquires real estate.

    If you want to specifically exclude certain people from benefiting from the trust, we can list such persons as being unable to receive distributions from the trust.

    Optional: Name any other specific persons who must never benefit from the trust.

    This email will receive the prepared documents and tax invoice for payment.

    Name of firm providing instructions

    Please let us know the purpose for setting up the discretionary trust, any background information or any queries you may have. We can consider this when reviewing the generated documents, otherwise, you may leave this blank.

    Contact us