Deborah W. Nason Writer. Twitter ninja. Wannabe organizer. Avid troublemaker. Bacon geek. Tv evangelist.

What are the disadvantages of a family trust?

1 min read

  • The trust’s income is taxed at the top marginal tax rate if it isn’t distributed.
  • Distributions to children under the age of 16 are taxed at up to 34%.
  • The trust doesn’t have the ability to allocate tax losses to beneficiaries.
  • Establishing and maintaining a trust costs money.

What are the pros and cons of a family trust?

  • There are a few technical notes.
  • There is asset protection in the event of divorce.
  • There is a reduction in tax when purchasing investments.
  • It’s perfect for retirement planning and superannuation.
  • Trust losses can’t be distributed.

When a person experiences a divorce, their assets are put at risk.

The Family Law Courts of Australia will consider any assets owned by discretionary trusts to which a spouse is a beneficiary as a form of financial resource, and can factor this into their judgements regarding the split of assets. If the bankrupt person has not transferred wealth to the trust with the intention to defeat the creditor, then trusts may be able to offer some protection. One of the most important reasons to open a family trust is to protect yourself from your debts. A discretionary trust is a great way to supplement the earnings of Australian workers who build their retirement funds through superannuation.

If you want to manage the trust after your death, this will allow assets to continue in their existing structure without stamp duty and income tax issues. Imagine a couple buying an investment property and receiving rent from tenants.

The rent being paid isn’t enough to cover interest and other costs, so the loss gets trapped inside the trust. In order to carry forward the loss and offset it against future income, the trust may need to make a family trust election to pass the loss tests which can limit potential beneficiaries in the future Significant taxation could be owed to the Federal Government if this is the case. Even after paying administration and set-up fees, the protection of family funds is not assured because trusts can be complicated and have a specific shelf-life of up to 80 years.

We recommend booking in some time to discuss options with one of our accountants, because starting a trust has advantages and disadvantages for all families. At A Squared Advisers, we have extensive experience in structuring for wealthAccumulation, so we can provide the expert advice you need to start or manage a family trust.

Get in touch with the team from A Squared Advisers to discuss the pros and cons of starting a family trust.

Do you know of any disadvantages of having a trust?

The loss of control over assets that are put into trust and their costs are some of the major disadvantages associated with trusts. Tax, estate duty, asset protection and stamp duty can be negative consequences of making trusts revocable.

Who owns the assets in a family trust?

The person is a trustee.

Who is the legal owner of the assets held in a trust?

The trustees are people.

Who owns the property in a family trust?

The home is owned by the trust, rather than you. You can be the Trustee of the property and have control over what happens to it after you die. Buying a home in a trust is more complicated than buying one in the conventional way.

Deborah W. Nason Writer. Twitter ninja. Wannabe organizer. Avid troublemaker. Bacon geek. Tv evangelist.

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