What is a Family Trust?
A trust, in its simplest form, refers to a situation in which property is subject to obligations owed by the property’s owner (the trustee) to the beneficiary or beneficiaries for whom the property is held. It is not a separate legal entity but rather, the recognition of a number of rights and obligations owed by the person(s) acting as trustee for the beneficiaries’ interest.
Expanding this definition, a family trust therefore will generally consist of parents settling the family home into the trust for the benefit of the family. In this situation, the settlor will often be the mum and dad, the trustee may be the parents and another trusted party, while the beneficiaries are the family - i.e. themselves and their children.
There are various reasons as to why an individual may want to create a Family Trust. The primary reason for its establishment will be for asset protection. They can also protect family assets from risk - such as business risk, and against other factors such as rest home accommodation subsidy clawbacks, provide a benefit to future generations, allows greater flexibility when determining one's affairs and further enable tax planning. Assets are protected in the sense that the ownership of the underlying asset has shifted, while the benefit of owning the asset is retained.
If you would like to know more about whether or not a trust is suitable for you, you can contact us for a complimentary meeting.