How Do Family Trusts Work?

The history of family trusts and the basics of what they involve.

We encourage many of our growing small businesses to set up family discretionary trusts. ?

These trusts are great for one family and have a number of people involved in them.

 Firstly, the person who starts a family trust is the settlor.

The settlor sets up the trust by contributing about $10 or $20, merely to kick it off.

And then… the settlor sails off into the sunset never to be known of again. ?

That settlor can’t be a family member. We don’t really want it to be the accountant or the lawyer either. It should be a next-door neighbour or someone known to the family.

All they do is start the trust. That’s it.

 Next is the trustee. This is the person who directs the trust and makes all the day-to-day decisions.

They have power to run that trust. The trustee can be an individual, or they can be the director of a trustee company.

 Then you have the all-powerful appointor.

The appointor is super important in a trust because they can sack the trustee and put another trustee in place, if ever needed.

 Finally, you have the beneficiaries of that family trust.

In Australia, beneficiaries under 18 can earn about $416 tax-free.

Beneficiaries over 18 pay individual tax rates.

Companies pay company rates.

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