Do I need a family trust?

There are many reasons to consider setting up a family trust but it is important to understand what they are and what benefits they can provide before making the move.

Some Common Reasons:

  • High marginal rate taxpayers with low-income family members to distribute to;
  • Individuals requiring asset protection against creditors;
  • Business partners;
  • Property owners with several properties and who wish to manage land tax more efficiently;
  • Investors who have experienced a relationship breakdown and require protection of assets;
  • Benefactors who expect challenges to estate planning;
  • Individuals in aged care who wish to reduce the income-tested fee and impact on the age pension.

How Much Does it Cost?

A basic accountant prepared trust will start at around $990 with ongoing accountancy fees varying between $1500 and $2500pa depending on the complexity involved.

Ongoing Maintenance of Trusts

This is primarily the distribution of income earned by the trust to thosewho qualify to be beneficiaries, this could include:

  • interest & dividends on investments (or shares)
  • rental profits from property or
  • capital gains

Undistributed income is taxed at the top marginal tax rate, hence why family trusts usually fully distribute the trust’s income before the financial year-end.

The percentage of income distributed to each beneficiary is often part of broader tax planning and will depend on the beneficiary’s individual income and tax rate.

Do I or Don’t I?

Many factors will determine the worth of a trust and hence it is vitally important to undertake a cost benefit analysis on the value of same. This should only be done with your accountant who will take into account your own personal circumstances.

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