Discretionary Trusts - Argon Law
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When acquiring a #business or investing in an asset, it is important that you give some thought to the #legal entity that is to own the asset.
It’s very common for business owners or investors to acquire assets through a vehicle known as a discretionary trust, which is sometimes called a family trust or an #investment trust.
In this video, John Gallagher from Argon Law will explain some of the benefits of discretionary trusts.
Both companies and individuals can hold assets as trustees under a discretionary trust, which is generally created upon the execution of a trust deed.
The trustee owns and operates the business or asset, but the benefit and profit that flows from doing so goes to people identified as the beneficiaries in the trust deed. These are often various members of the same family and their related companies or other entities.
The word “discretionary” is used because it’s the trustee who decides, from year to year, which of the listed beneficiaries should receive the profits and other benefits.
There’s no set proportion of the benefits that need to flow to any one beneficiary and the proportion that any one beneficiary receives can vary from year to year, at the discretion of the trustee.
If the trust income is distributed during the year it is earned, then the trust doesn’t pay tax on that income. Tax is only paid by the beneficiaries who receive distributions.
So one of the benefits of a discretionary trust is that the profits flowing from a business or asset can be shared around a family group, in such a way that less tax is paid, overall, than might otherwise be the case.
Another benefit is that, because the beneficiaries don’t own the trust assets, if a particular beneficiary is in financial trouble, the trust assets can’t be claimed by the creditors of that beneficiary.
Do you require legal advice? Contact Argon Law via the links listed below.
You can find us at http://www.argonlaw.com.au/.
Please feel free to contact us at [email protected] / 07 5443 9988
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