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  1. #1

    Default Discretionary Trust Advice?

    G'day,

    Yep - I know - go talk to a lawyer... can't afford one... So I figured MacTalk was my next best shot! :}

    My brother-in-law (wife's brother) is about to enter into a business partnership (without going into details, essentially he's setting up an industrial service in Asia), and is creating a Discretionary Trust that he would like (with our consent) to name his nephews (ie my kids) as beneficiaries. (It's not just for our kids - his own, and his other nephew as well) He says they won't have any obligations toward the Trust, but if he does "make it big", then he'll be able to share some of it with them.

    I've read a few things online, and can't see any obvious concerns... But nor do I really see the need for it...??? If he wants to share his wealth with my kids, surely he can do that if/when it happens without the need for them to be listed in a Trust...? Is there any obvious gain to him doing this (for either him, or my kids)?

    Appreciate any advice/experience you can offer.

    Thanks,

    cosmic
    MacTalk - the bianca's of geekdom
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  2. #2

    Default

    Complex area, and if you can't afford a lawyer, just ask your BIL if you can sit in a meeting with his lawyer, so that you understand the implications of the structure for your children. Internet advice on this is about as valuable as the Internet DIYs on open heart surgery. 😱

  3. #3

    Default

    They are set up by lawyers but run and managed by accountants. We have a family trust where distributions from my wife's accounting firm come in as part of her salary. I say my wife's firm but she works there the owners run that trust. It means anything over $300 odd each and your kids start paying tax. It used to be higher but the tax laws changed, right around when we set ours up. He seems to be trying to spread his income around away from himself to lower his income, but any child getting more than $300odd will be liable for tax.
    Successful trade with: Clockwork.....(and what a trade!)

  4. #4

    Join Date
    Feb 2008
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    Default

    Beneficiaries of a trust don't have any obligations unless the trust actually pays out something to them. Think of the trust as a company and the beneficiaries as employees. If the trust doesn't pay the employees anything, they don't have to pay tax to the ATO.

    Its not uncommon to list beneficiaries right at the beginning. You can add them at a later stage, but most of the time, having them listed upfront reduces the costs of adding them later. The cost of making changes to trust is high so you want to try get everything right at the time.

    BTW, you don't need a lawyer, a good accountant should be able to provide you with advice on trusts. The lawyer is the one who does the work, sets up the constitution, but most of the time it's the accounting who is advising you about the distributions of funds.
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