Beneficiaries of a discretionary trust have no claim or legal entitlement to any portion of the trust income (nor capital in some cases). They only receive a benefit when the trustee exercises their discretion and distributes the income. The essence of a discretionary trust is that the trustee’s legal obligation is to consider beneficiaries for a distribution; not to actually make a distribution. This means that you can have a list of beneficiaries which may be a family for example all related companies, but you will decide in any particular year depending on the type of income and the amount of income who if any person is to make distributions to. If the trustee distributes the income the trustee generally pay tax on that income. The trustee retains an income and the trustee many jurisdictions impose penalty rates for undistributed income or if the income is distributed to minors. However, the uses tax planning vehicles is diminished and they are more important as asset protection vehicles. This means that no beneficiary has a vested present entitlement. I could be bankrupt for example and have all my assets validly in the trust, subject to clawback provisions and depending how it was done, the assets remain protected, and I may STILL receive distributions. The net effect is that a person’s status as a beneficiary does not result in a tangible gain or proprietary interest in the trust property. As there is no claim to the property, you are not subject to tax implications if you do not receive a distribution. Disadvantages can include that the trustee can stop distributions to a particular beneficiary at any time. Likewise, a beneficiary can do little to change this arrangement. This can present a problem should a dispute arise with the trustee, for example, a family fallout. This is a key reason why you should exercise great care when selecting a trustee. Of course in the United States there are revocable trusts in some states (e.g. Nevada) There are also letters of wishes. There are also protectors that control the trustee or enforcers and so on. It also set up your own trustee company and is a private trustee company there are many ways to have some control but if you have too much control you will be considered not to have divested the asset it will be considered to be a sham trust.

Companies and individuals can be beneficiaries of a trust, and they’ll fall into one of the following categories:

Yes, but you should be aware that if a trustee distributes income to someone under 18, they will be subject to a substantial amount of tax. Aside from tax, people under 18 are not legal persons in most jurisdictions while distribution is made to them their parent or guardian will be the controller. Yes of course. Trusts are gifted any property you may so choose or trading trust may acquire property. Of course, of its real property taxes and transfer charges. It may be better to sell the property and make a gift of cash. If you set up a new trust, you can transfer property that you already own into it. You should know that the transfer of property into a trust will generally be classed as a sale. This can be an expensive exercise as, in addition to the appropriate sales contracts/agreements, this can incur Capital Gains Tax and stamp duty. Ensure that you speak with an accountant if you’re looking to establish a trust and transfer existing property.

Approximately 5% of all businesses in Australia operate through a trust structure. If you are going to run a business through a trust, you will require a Australian Business Number. As with all trust property, the trustee will own the business’ assets.

Legally this is an interesting question.

You will need to speak to us to get all the answers.

The primary duty of the trustees is to protect trust assets.

Consider how a trustee may then be breaching its obligations by engaging in trading?

And what if the trust trades through a wholly owned company? who will be the directors of the trustee as a director of the trading company, is that a conflict of the trustee’s duties?

Don’t be fooled into thinking that this simple.

This is why the British Virgin Islands created “Vista trusts” that provide a legislative authority trustees to engage in trading, without breaching the duties of the trustee.

Watch this space when insolvencies happen.

Another frequently asked question about trust concerns whether the beneficiaries of trust all have to be from the same family. A family trust and a discretionary trust are essentially the same. The trustee maintains the discretion to distribute income as they see fit. It is more likely, however, that the beneficiaries are all members of the same family. A family trust is simply a commonly used term, rather than a requirement that the beneficiaries all be from the same family. Therefore, there is no restriction on you listing people outside your family as a beneficiary.

However, if you do list people outside your family, you may not be able to make a family trust election for tax purposes. This means you will lose access to certain concessions and benefits you would otherwise get if you made the family trust election. Further, if you make distributions to people outside your family, the trustee might need to pay tax on these distributions at the highest marginal tax rate. This is if you have made a family trust election to the Australian Taxation Office for that trust.

Leaving aside the tax obligations, you can have unborn beneficiaries and it all depends on your definition of “family” within the trust deed.

A trustee is considered to have a fiduciary relationship in administering the assets for the sole benefit of the beneficiaries. The scope of a fire Nutri relationship is vast and complex is the subject of many books and cases. Fiduciary obligations are a set of conduct rules which a trustee must follow. The reason why a trustee must hold true to their fiduciary obligations is to ensure they act in an honest and reasonable way, and do not use their position as trustee to benefit themselves. A fiduciary relationship exists when a person (the ‘fiduciary’) is in a position of significant trust and confidence over another. The fiduciary relationship arises in circumstances where the fiduciary is required to place the other person’s interests before their own. The trustee-beneficiary relationship is one of the prime examples of a fiduciary relationship. There are also many other circumstances where a fiduciary relationship exists. Fiduciary relationship Some factors below indicate that a fiduciary relationship exists The factors that indicate that a fiduciary relationship exists include:

• trust and confidence placed in a person;
• an undertaking by that person to act on behalf of another;
• the other person is vulnerable as a result; and
• there is an inequality in bargaining power between the two parties.

• The trustee must not enter into transactions which give rise to a conflict of interest between the trustee’s personal interests and their duty owed to the beneficiary.
• Example: The manager of a share portfolio must buy and sell those shares which will be of the most benefit for the trust and its beneficiaries, not just those from which the manager might earn a bigger commission.
• The trustee must account to the beneficiary for any improper gain obtained as a result of a conflict of interest. Such as proceeds gained by the trustee as a result of selling a car held on trust for the beneficiary; and
• knowledge or opportunity gained as a result of their position.