Placing Your Family Wealth In A Trust Fund

benefits of trust fund

Are you thinking of placing your family wealth in a trust fund?  Let’s talk about some of the benefits of a trust fund and how they might benefit you long-term.

Before you get started with Family Trusts, you need to know that there is no ‘one-size-fits-all’ type of trust.

The trust you use will depend on many factors, such as (just to name a few):

  • the type of asset or business
  • financing
  • income type
  • marital status
  • susceptibility to being sued

Basically, the function of a trust is to separate control and ownership. The results of this are that assets are protected and profits are distributed in the most tax-effective way.

Types of Trusts

Whilst there are many types of family trusts, the two most commonly used are:

  1.  Testamentary Trust – This type of trust takes effect after the will-maker’s death and is set up through a directive left in the will.
  2.  Discretionary Trust – This type of trust is set up by a ‘trust deed’, which commences during the life of the person(s) who establishes the trust.

Both types of trust allow income and capital to be flexibly distributed to beneficiaries. But the beneficiaries have no legal entitlement or interest in the property of the trust until the trust deed declares it.

The trustee is the legal owner of the trust property.  As the Trustee, he or she is responsible for managing the trust fund on behalf of the beneficiaries. The trustee is bound by law to obey the terms of the trust deed as well as to always act in the best interests of the beneficiaries.

Although a trust can operate for up to 80 years in Australia, it’s common to have a clause within the trust deed that allows the trustee to wind it up earlier, if that’s considered appropriate.

Benefits of Using Trusts To Manage Family Wealth

Some of the benefits of managing family wealth with trusts include:

  • Cost: For a straightforward structure, the costs of establishment are relatively low. It is recommended that specialist advice be sought for more complicated family scenarios.
  • Effective family tax management: Income can be directed to members of the family on lower tax rates. Different types of income can also be directed to different family members.
  • Simplified regulation: Trusts are less complicated than operating a company structure.
  • Tailoring: Most modern-day trust deeds are flexible in their operation and can cater to a wide variety of beneficiary classes and investments.
  • Geographical flexibility: A trust established under Australian law can operate effectively in every Australian state. If potential beneficiaries live overseas, seek specialist advice to determine the optimal structure.
  • Protection of assets: Family assets may be protected from creditors in the event of bankruptcy or insolvency under certain conditions.

Due to the taxation flexibility that discretionary trusts provide, the ATO scrutinises these trusts to make sure that:

  • all transactions are undertaken on a commercial, arms-length basis and,
  • distributions are in accordance with the trust deed, specifically targeting the distribution of different types and amounts of income to individual beneficiaries.

Everyone Benefits from a Well-Planned Trust Structure

You don’t have to be rich to benefit from a trust.  Anyone can gain peace of mind about the financial wellbeing of their loved ones’ after they are gone by setting up a family trust.

Creating a trust fund offers considerable estate planning benefits and more certainty in how your assets will be dealt with after your death.

To discuss whether a trust fund is a good choice for you – or just learn more about them – book a call with a Think Big financial advisor today.


This represents general information only. Before making any financial or investment decisions, we recommend you consult a financial planner to take into account your personal investment objectives, financial situation and individual needs.  Speak with a financial specialist (such as TBFG) to get advice tailored to your exact circumstances.