For our friends down under, having the proper legal framework in place should be something other than something that keeps you up at night - so let's dive into what trusts are, why they're essential for Australians, and how to get started creating one.
What is a trust?
Trust is a cornerstone of human living, without which we'd be unable to build meaningful relationships or organisations. It's a critical concept often used in legal and interpersonal contexts. A trust account can be described as an arrangement between parties where one party (the "trustee") holds assets on behalf of another party (the "beneficiary") for the beneficiary's benefit.
A specific legal document commonly sets up this relationship to ensure that the trustee must take specific actions to manage and distribute assets according to the beneficiary's intent. By utilising trusts, beneficiaries are provided with greater control over their estates, since their funds are held in an independent capacity, mitigating risk from outside parties and ensuring that their wishes will be honoured no matter what happens.
How does trust work in Australia?
Trusts are a widespread tool of estate planning in Australia. The trust account is a central repository for trust funds and assets, which can be used to pay out benefits or income to beneficiaries. The trust documents will outline who the trustees and beneficiaries of the trust are, along with how trust funds should be managed, invested, spent, and distributed among the trust's beneficiaries.
A trust is generally managed and administered by trustees, who are responsible for ensuring that trust funds are invested wisely and used according to the beneficiary's wishes. It may involve allocating trust funds to specific investments or areas of need and overseeing the trust's overall financial management. Additionally, trust funds are not subject to the same taxation as other forms of income, allowing beneficiaries to maximise their potential financial gains.
Australia's trust deeds and accounts provide a solid legal framework for trust administration and management. In addition to providing security and assurance that trust funds will be used according to the beneficiary's wishes, trust documents help ensure that all parties interests are respected.
Benefits of setting up trust account in Australia
Primarily, setting up trust accounts protect assets from outside parties and ensures that funds will be used according to the beneficiary's wishes. In addition, trustees can take advantage of tax-efficient strategies to maximise the chances of their investments doing well without subjecting themselves to the same taxation as other forms of income.
Trusts also provide financial security and stability for beneficiaries, allowing them to rest assured that their assets will be taken care of no matter what life throws at them. Additionally, trust documents are an excellent tool for making sure that all parties involved remain on the same page and that any disputes between them can be quickly resolved.
Finally, setting up trusts in Australia is relatively straightforward and inexpensive compared to other estate planning forms. All these factors make trusts an attractive option for those looking to secure their financial future.
Types of trust accounts in Australia
Discretionary trusts are a popular form of trust account that allows trustees to allocate assets or funds among beneficiaries according to their wishes. This type of trust is often used for estate planning as it allows the trustees to decide how trust funds should be allocated while ensuring that the beneficiary's wishes are respected.
Unit trusts allow beneficiaries to purchase units in a trust and accordingly receive distributions from the trust account. Businesses or large families often use this type of account, as it provides a way for different individuals or business partners to own and benefit from the same trust.
Finally, fixed trusts are used when a beneficiary wishes to preserve their assets for a specific purpose or event. These trusts are generally set up with predetermined distributions that cannot be changed without the permission of the beneficiaries.
Creating a trust account in Australia
Creating a trust account in Australia is relatively straightforward. The first step is to create a trust deed, which outlines who the trustees and beneficiaries of the trust are, along with how trust funds should be managed, invested, spent, and distributed among the trust's beneficiaries.
Once this document has been created, it must then be signed by all trustees and beneficiaries involved in the trust. Once this has been done, the trust deed must then be registered with the Australian Taxation Office and a trust account opened at an approved financial institution.