A discretionary trust is one of the most popular vehicles for doing business in Western Australia. Under a discretionary trust no beneficiary has a fixed entitlement. As a result, a Trustee is able to distribute income to numerous beneficiaries and take advantage of the various tax benefits associated with doing so. Discretionary trusts are also used as a great tool for asset protection.
This simple form will help you or your accountant to set up your trust. There are 4 key persons in a discretionary trust:
- The settlor. This is the person who “establishes the trust”. This person cannot be a person who will benefit under the trust. It needs to be someone disconnected from the trust. They will also be responsible for paying the settled sum which is the money needed to form the trust. The HHG Fixed Fee Essentials Trust is set up so that the settled sum is only $10.
- The trustee. This is the person who is in control of the day to day running of the trust and makes the determinations each year about who is going to receive what from the trust. You can appoint up to four people to be joint trustees.
- The guardian. This is the person who can “hire and fire” the trustee. The guardian’s consent is also required for some of the big decisions such as varying the trust, changing the trustee powers and other things. This person can be the same as the trustee, however there are some important asset protection reasons why you may choose a different person to fill this role. You should speak to a HHG solicitor if you have any concerns regarding asset protection.
- The specified beneficiaries. These are the people that the class of beneficiaries will be defined in relation to. For example, the class of beneficiaries usually includes “the children and grandchildren of the specified beneficiaries and the parents and siblings of the specified beneficiaries”. There are no default distribution provisions in the HHG Fixed Fee Essentials Trust Deed so you need not worry about any default tax provisions.
Note: The HHG Fixed Fee Essentials Trust is prepared for use in Western Australia only. If you are establishing the trust for use in another State, please contact our offices before proceeding. A standard discretionary trust may not be the right entity for you. You should seek personal legal and accounting advice before proceeding to ensure that this product is appropriate. The above does not constitute legal advice; it is generic information only.
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