Family / Discretionary Trust Deed

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We’ve developed a market-leading family / discretionary trust deed that will give you the maximum possible flexibility in terms of “streaming” income of different categories (eg, franked dividends, capital gains, etc) to different beneficiaries.

Our cutting-edge family / discretionary trust deed has been drafted in accordance with the latest guidance laid down by CPA Australia in relation to trust streaming following the pivotal decision of the High Court in Commissioner of Taxation v Phillip Bamford & Ors [2010] HCA 10 and the consequent changes to the tax laws that were introduced in the Tax Laws Amendment (2011 Measures No 5) Act 2011 (Cth).

Document Overview:

1️⃣ Market-leading Family Trust Deed that maximises flexibility.

2️⃣ You can name up to 5 appointors, up to 5 primary beneficiaries and up to 5 initial trustees.

3️⃣ Each initial trustee can be an individual or a company.

Stamp Duty:

In some Australian jurisdictions Stamp Duty is payable upon the establishment of a new Trust.

In NSW the Trust Deed must be stamped within 3 months of execution - cost $500.
$10 per additional stamped copy.

In VIC the Trust Deed must be stamped within 30 days of execution - cost $200.
No charge to stamp additional copies.

In the NT the Trust Deed must be stamped within 60 days of execution - cost $20.
$5 per additional stamped copy).

In TAS the Trust Deed must be stamped within 90 days of execution - cost $50.
No charge to stamp additional copies.

Stamping the Trust Deed where no Stamp Duty is payable:

If the Trust Deed is physically signed in a jurisdiction such as the ACT, QLD, SA, or WA then no Stamp Duty is payable.

No time limits apply for stamping in these jurisdictions.

Circumventing Potential Civil/Criminal Liabilities + Penalties

All Discretionary Trust Deeds contain broad definitions of eligible beneficiaries in order to provide as much flexibility as possible for Trust Distributions.

As a result, various Commonwealth + State legislation could deem your Trust liable to comply with its provisions.

Long-lost siblings, uncles, aunts, nephews or even kids born or who may be residing offshore as part of their professional or lifestyle pursuits could be or become foreign persons + trigger the need for compliance with the relevant legislation.

Failure to mitigate this risk by ensuring the Trust Deed prevents trust distributions to foreign persons creates the potential for:

➲ Foreign Investment Review Board [FIRB] civil + criminal penalties with hefty fines of up to $787,500 or 10 percent of the property value; +

➲ Combined Vacancy Tax liability + penalties of more than $150,000 for those who fail to keep adequate records and miss the deadline to lodge a return declaring occupancy of their assets with the Australian Taxation Office (ATO); or

➲ The Trust acquiring or leasing NSW Residential Land + potentially being liable to pay the NSW Government the 8% NSW Purchaser Duty + 2% Land Tax Surcharge on NSW Residential Land (freehold or leasehold, vacant or with a dwelling incl. strata).

Note: The definition of foreign person differs for Commonwealth and State based legislative purposes.

Our Trust Deed provides 2 Alternative Solutions

Your Family/Discretionary Trust can be setup to either:

1️⃣  Revocably prevent any trust distributions to any foreign person; This option retains flexibility for the Trust to reverse its position at some point in the future to allow distributions to foreign persons; or

2️⃣  Irrevocably prevent any trust distributions to any foreign person. This option is highly recommended if your Trust plans on purchasing or leasing residential property in NSW.

Please reach our to our legal team if you need clarification or assistance with this complex decision.

Apply for ABN and TFN, and open a separate bank account:

Upon establishment of the trust, you need to:

1️⃣  Promptly make an application for an ABN and TFN for the trust; and

2️⃣ Open a separate bank account in the name of the trustee "as trustee for" the full name of the trust.

Social Sharing Image: Courtesy of Christine Roy on Unsplash

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What is the maximum life of a Trust in Australia?

Trusts in Australia have a maximum life of 80 years (except in South Australia^)

Any trust that purports or attempts to last for a longer period is void.

An exception exists for Charitable Trusts created with charitable objects or purposes which can endure forever.

Notes: ^ s62. of the Law of Property Act 1936 (SA) may be used by prescribed interested parties to apply to the Court for orders forcing the South Australian Trust to vest within 80 years.

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This FAQ was written by James D. Ford GAICD | Principal Solicitor, Blue Ocean Law Group℠.

Important Notice:

This FAQ is intended for general interest + information only.

It is not legal advice, nor should it be relied upon or used as such.

We recommend you always consult a lawyer for legal advice specifically tailored to your needs & circumstances.

Glossary of Key Terms used in the Law of Trusts

Appointor / Principal

Is the term used in modern Trust Deeds to describe the person who has the power to appoint and remove the trustee.

Accordingly, the Appointor assumes indirect control over the whole operation of the Trust.

We generally recommend joint Appointors or at least a clear succession should the Appointor die.

If there is no nominated successor, the Appointor’s legal personal representative succeeds as the Appointor.

Where an Appointor is deemed to have lost legal capacity (e.g. which might be a possibility if the Appointor suffers from a mental condition such as dementia) and where an Enduring Power of Attorney is in place, the Attorney succeeds as the Appointor.

ATF

‘As trustee for’.

Beneficiary

Any ascertainable person or group of people can be the beneficiary of a private express trust.

Person includes a legal person (also called a legal entity) such as a corporation, unincorporated association, etc.

Charitable trust

A trust is a charitable trust when it is established for charitable purposes (objects).

“A purpose trust that is directed to exclusively charitable purposes and that exhibits public benefit".

A Charitable Trust may be quite general (for example for the relief of poverty) or highly specific (for example the care of the aged in a specific geographic region).

Charitable Trusts need not have any vesting date, and may exist in perpetuity.

Constructive Trust

Not really a trust.

It is a remedy decreed by the Court to prevent unjust enrichment.

The trustee will have only 1 duty: to transfer the property to the intended beneficiary as determined by the Court.

It is a means to disgorge a wrongdoer of ill-gotten gains.

Corpus of a Trust

Property of the trust. Any presently existing interest in property that can be transferred can be the corpus of a trust.

Cy Pres

Pronounced Sigh Pray. It is a phrase adopted from the French meaning, “as near as possible” to the original intention.

Family / Discretionary Trust

 In Australia, a Discretionary Trust is a common structure to run a business out of because it offers many taxation advantages.

For Example: The flexibility to distribute profit to different beneficiaries (including streaming of dividends to a particular individual/s), the ability to access significant capital gains concessions and stream those capital gains to a particular beneficiary.

Inter Vivos

Between living persons, someone transfers or gives property to another person while both are alive, such as a parent giving money or other property to their children.  

Trusts established during a person’s lifetime are often referred to as being an Inter-Vivos Trust.

Object

A legal term used in trusts law.  

An object of a trust is a beneficiary of that trust.

In Wills where a gift is made to a particular group or class of people, an object means someone from that group.  

For Example: The group might be described in a Will as ‘my children’ or ‘my nieces and nephews’.

Private Express Trust

A fiduciary relationship with respect to property whereby one person, the trustee, holds legal title for the benefit of another, the beneficiary, and which arises out of a manifestation of intent to create it for a legal purpose.

Resulting Trust

A resulting trust is an implied in fact trust and is based upon the presumed intent of the parties.

If a resulting trust is decreed by the court, the resulting trustee will transfer the property to the settlor if the settlor is alive, and if not, to the settlor’s estate, i.e. to the residuary devisees if any, and if none, to the intestate takers (the heirs).

Rule Against Perpetuities

At common law, the modern rule against perpetuities, is that no interest is good unless it must vest, if at all, no later than 21 years after the death of a life in being who is alive at the creation of the interest.

At common law, an interest is void from the outset if it may possibly vest outside the perpetuity period, such question being determined having regard to circumstances existing at the commencement of the period.

It is not possible at common law, to ‘wait and see’ whether the rule is in fact offended by events as they actually turn out.

The common law rule against perpetuities has been modified by legislation in all Australian jurisdictions, except South Australia where the rule has been abolished.

The most significant reforms to the common law in all jurisdictions where legislative intervention has occurred has been the introduction of a ‘wait and see’ provision, and statutory limits preventing any trust from existing for more than 80 years.

Any trust that purports or attempts to last for a longer period of time is void.

The exception to this rule is for Charitable Trusts.

Secret Trust

Generally speaking, a secret trust arises when a testator wishes to keep secret an object within the Will, such as bestowing a benefit to a political cause, or granting a trust to relatives that may be unknown to the wider family.

Secret trusts fall within two general categories: fully-secret and half-secret trusts.

The basic difference between a fully-secret and half-secret trust, is that there is no indication in the terms of the Will that a fully-secret trust exists.

Whereas, a half-secret trust will be mentioned in the Will, but may leave out the identity of the beneficiary, as well as the gift to be bestowed.

Settlor

The person who initiates the formation of the trust by the provision of the Settled Sum (usually a nominal amount). Apart from providing the Settled Sum and executing the Trust Deed, the Settlor takes no further part in the Trust operations.

A Settlor will often be a family friend or a solicitor or an accountant who will not be a beneficiary of the trust.

Note: The settlor of a Discretionary Trust must be an independent person.

Special Disability Trust

A trust which allows parents or other family members to leave assets in trust for an individual which can be used to fund ongoing care, medical expenses, accommodation, and some discretionary expenditure for that person into the future, without affecting their entitlement to a disability support pension.

Spendthrift Trust

A trust where the beneficiary is unable to transfer his/her interest, either voluntarily or involuntarily. He/She cannot sell or give away his/her right to income or corpus, and his/her creditors cannot attached these rights.

Support Trust

A trust where the trustee is required to use only so much of the income or principal as is necessary for the beneficiary's health, support, maintenance and education.

Trustee

A person (or company) appointed to hold property on trust for others, the beneficiaries subject to the terms set out in a will, as a testamentary trust. Executors are often appointed to act as trustees where a trustee role is required following administration of the estate.  However professional advisers or their firms may also be appointed depending on the circumstances.

Testamentary Trust

A trust created by a Will, which only comes into being after the testator passes away.

Testamentary Charitable Trust

A Charitable Trust created by a Will, which only comes into being after the testator passes away.

Testamentary Pet Trust

A trust for the care and support of the testator's pets created by a Will, which only comes into being after the testator passes away.

Totten Trust

Actually a Totten Bank Account [POD]* not common in Australia (used o/seas)

Trust Deed

A legal document that sets out the rules for establishing and operating your trust.

Unit Trust

The trust deed functions in much the same way as the constitution of a company, and units in the unit trust operate in a similar way to shares in a company.

Vesting Day

The Vesting Day is generally 80 years (except in South Australia) from the date of commencement of the Trust.

That is because, as a matter of law, the Trust must terminate or ‘vest’ at a date not later than 80 years after its commencement.

A provision maybe included in the Trust, which enables the Trustee to nominate an earlier Vesting Day.

More than 1000+ Australian Lawyers use Embedded Lawyer-Logic. How does it work?

More than 1000+ Australian lawyers use this industry leading automated legal document generation solution. It uses Embedded Lawyer-Logic™ designed by leading lawyers in their respective fields.

Step 1️⃣: Information Gathering

Our intelligent online questionnaire adapts to your answers and only asks relevant questions.

Simply follow the guidance and enter the requested information about your matter.

Step 2️⃣: Document Assembly

The information is then sent to our back-end legal document generation engine, which follows a matrix of algorithms to make decisions about what should be in your legal document, just as an expert human lawyer would do.

The engine then draws from an enormous body of content to assemble a top-tier quality legal document that’s tailored to your situation + requirements.

Our Embedded Lawyer-Logic™ technology includes numerous quality control checks + automatic error-correction, massively reducing the risk of human error.

Step 3️⃣: Document Delivery

The finished document is then emailed to you in PDF format, ready to print and sign.

Optional: Lawyer Review/Assistance

Your answers to the online questionnaire and a copy of the finished document in both Word + PDF formats are automatically forwarded to our legal team.

If we notice anything out of-the-ordinary we will contact you to discuss.

If you are a subscribed member or opt for paid Lawyer-Assistance, we will use the allocated time to assist to clarify and resolve any questions you may have.

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If your matter is complex, high risk or you have never been involved in legal matters before, we highly recommend you opt for our Full Service.

Our legal team will contact you and assist you throughout the entire process.

If you are a subscribed member the cost for the time spent by our legal team to assist you is heavily discounted.

Credits:

This FAQ was written by James D. Ford GAICD | Principal Solicitor, Blue Ocean Law Group℠.

When should I reach out to speak to your legal team?

Our [Self-Service] legal documents are designed to be completed "without the intervention of a lawyer".

This approach will be appropriate for the majority of routine legal matters, where you are experienced and have learnt what needs to be considered and have gained experience in using our 24/7 online document portal to generate your legal documents instantly.

Some routine matters maybe totally new to you (meaning that you will have questions and we recommend you select our [Lawyer-Assisted] service).

Other matters maybe unusually complex, or of such high-value or risk that involving our legal team is the prudent course to take.

For these matters we recommend you select our [Full Service] option.

Credits:

This FAQ was written by James D. Ford GAICD | Principal Solicitor, Blue Ocean Law Group℠.