Basics of Family Discretionary Trusts
A trust is a legal structure designed to manage assets including businesses for the benefit of others. This arrangement is particularly effective for wealth protection, which is why a lot of people choose to manage their family business or assets through a trust.
Trusts offer flexibility and control over who benefits from the trust and how much they receive. Usually, family members manage the trust for the benefit of their family.
When forming a Trust, there are several important decisions to make. We have created this fact sheet to guide you through the decision-making process.
Step 1: Decide Who Controls the Trust
Appointor: The Appointor controls the Trustee and, by extension, the trust. They have the authority to dismiss the Trustee at any time and can also serve as the Trustee.
Step 2: Decide Who Will Be the Settlor
Settlor: The Settlor is the individual who legally establishes the trust but will never be a beneficiary. It is very common for this to be your Accountant or Legal Advisor.
Step 3: Decide Who Will Be the Trustee
Trustee: The Trustee manages the trust, subject to the Appointor’s powers. Trust assets are typically held in the Trustee's name. The Trustee be a Corporate Trustee if you are looking to maximise Wealth Protection.
Step 4: Decide Who Will Be the Primary Beneficiary
Beneficiary: This is the person who all family connections are determined by. The nomination of this individual is particularly important if you are adding the additional mechanics of a Bloodline Trust, where the benefit of the Trust is tied to the Beneficiaries bloodline.
Step 5: Plan for the Future
Succession: Determine who will take on the role of Appointor and Primary Beneficiary upon the original holders' death. This should be documented at the time of the formation of the Trust – and these instructions can be updated.
Step 6: Determine Income Distribution Defaults
Specified Beneficiaries: If the Trustee does not make a distribution, a default beneficiary must be named to receive the trust's income. In a Family Trust, these are often the husband, wife, and/or their children.
Setting up a Family Discretionary Trust involves making these key decisions to ensure that your family’s wealth is protected and managed according to your wishes.
GrowthLogic Advisors are experienced at helping you through the process of forming Family Discretionary Trusts as well as Bloodline Trusts.
If this is something you would like to action to protect your family’s wealth – let us help you get started.