Testamentary trusts are formed upon the death of a person who has specified its creation in a will. These are not discussed here but if you have any questions feel free to chat below using our live chat tools.
Note that Centrelink may include the income and assets of a trust when working out your social security payments if you are considered to be a controller of a trust. Further information can be found at the Centrelink website.
Trusts are a useful investment structure, but are often not fully understood.
Briefly, the trust is formed by executing a deed which documents the establishment of the trust.
The trustee determines to whom and in what proportion the income/assets of the trust are distributed.
The appointor (usually the person establishing the trust) has the discretionary power under the trust deed to remove and replace the trustee. The appointor has the power to nominate a successor on his or her death and failing any such appointment, the personal representative of the appointor will become the new appointor.
The specified beneficiary are usually the husband and wife or partner and so by definition the range of beneficiaries include any children and any related entities (any companies of the which the specified beneficiaries are directors or shareholders).
A trust can distribute income and capital gains in accordance with the trust deed, however, it cannot distribute losses. Losses can be carried forward to be offset against future income. A trust can also retain income, and if that income is taxable, then tax is payable at the top marginal rate plus the Medicare levy.
Testamentary trusts which are formed upon the death of a person who has specified its creation in a will are discussed in Estate planning.
Note that Centrelink may include the income and assets of a trust when working out your social security payments if you are considered to be a controller of a trust. Further information can be found at the Centrelink website.
Below is our video tutorial on who to appoint as the trustee of your trust:
Like slicing up a pizza, a unit trust is one where the assets are held and administered by the trustee of the trust for the holders of units in the unit trust. Units are usually in equal portions an allocated to an identifiable owner.
In other words, this means that unit trusts pre-determine the unit holders entitlements. The entitlement may be for income, capital or both?
Unit trusts are often used where unrelated parties run a business together and where the units are then held by a family trust and for managed funds where investors hold units in the trust.
Below is our video tutorial on who to appoint as the trustee of your trust:
