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.