Should I have a family trust?

Family trusts are a buzz word right now, as we become more empowered with our financial future and focused on working towards financial freedom.

What is a family trust?

A family (or discretionary) trust is a trust set up to benefit family members. These trusts enable the ongoing transfer of assets from an individual to the trust, which means any income generated from these assets does not incur income tax.

Having a family trust is a great investment and ownership structure that allows the opportunity and, importantly, flexibility to distribute investment income to beneficiaries of the trust (normally family members) at the discretion of the trustees (either an individual or company). The other important advantage of a Family Trust is it offers asset protection and limited liability that is not offered via individual or joint ownership structures.

A family trust can be used for many different reasons with the most common being running a family business or for holding assets.

In both examples above, one of the principal reasons to engage a family trust is the ability to distribute income earned (via the business or investments) on a discretionary basis to beneficiaries on the lowest individual tax rate. Care must be taken when children under the age of 18 are trust beneficiaries as they will be subject to applicable minor tax rates and not eligible for other tax offsets.

Loan Studio Financial Advisor, Brendon Honeyford, can take you through the steps to explore if a Family Trust is right for your situation and financial plan.