What is a family trust?

A family trust is a legal structure where money or assets are managed by a person (or organisation) on behalf of and for the benefit of another.  A family trust (also known as a discretionary trust) is where money and/or assets are held in trust for benefit of members of a family group.

How is income treated for a family trust?

Trusts do not pay income tax on income which is distributed to beneficiaries, only undistributed income.  For beneficiaries, income received from a trust are treated as part of their normal assessable income.  Trustees should be careful in choosing how to distribute income to beneficiaries as there can be hefty penalties for distributions made to minors


What are the benefits of having a family trust?

Family trusts have several benefits which make them attractive.  The most important of these are:

Tax advantages:  having a family trust can provide some tax advantages by allowing income to be distributed to family members who are on lower tax rates (such as a low-income or non-working spouse), thereby reducing your tax bill.

Asset protection:  family trusts can assist in protecting the family group’s assets where a member becomes bankrupt or insolvent.

Estate planning:  using a trust can provide estate planning benefits with more certainty about how your assets will be managed after your death.

Flexibility:  one of the main advantages of having a family trust is that the trustee (the person or persons responsible for the trust and its’ assets) can distribute income earned by the trust to the beneficiaries however they wish.


Things to consider before starting a family trust:

It is very important that trustees be actively involved in the running of a trust.  Trustees must be involved in all decision-making, record decisions and prepare annual financial statements.  Trusts must have a formal written trust deed with a separate bank account.

A simple family trust can cost around $800 to $1000 per year to run.  This cost includes accounting costs and financial advice for significant financial decisions.

Finding out whether a family trust could be right for you

A Financial Spectrum financial planner in Sydney can help you decide whether a family trust could be right for your personal situation.  If appropriate, our financial advisers can also facilitate the establishment of a family trust on your behalf through our network of legal and accounting professionals.  Give us a call today on 1300 886 018 to find out more about family trusts.


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4 Responses to “Family Trusts Explained”

  1. Sarah August 23, 2011 at 10:54 am #

    I’ve been interested in family trusts for a while…. thanks for this introduction – it’s a good starting point for people like me who have no idea about these things.

  2. Financial Planner September 7, 2011 at 6:58 pm #

    No problem Sarah. Glad to have helped.

  3. JJ April 16, 2012 at 4:28 pm #

    I have Chidsupport problems, child support are including all negatively guered income i have from my negativly guerd properties? This has made my payments impossible. I may need to go bankrupt!
    Can a family trust help me & my adult family member keep what little investments i have?

  4. Dianna Rea November 1, 2012 at 9:44 pm #

    My grandfather recently passed away and has left the house for my aunty to live in until she passes away then it is to go to the other siblings. She has autism. Is a family trust the best way to manage the estate?