Trust FAQs

You can call your trust what ever you like, however it is good practise to make the name descriptive of what it is. For example it is better to use ‘The Jones Family Trust’ rather than just ‘Jones’. This makes it much easier for entities that deal with your trust so they know what it is. Also remember that this name is going to appear on bank accounts, share registers.

Discretionary and Unit trusts are not registered with a governing body like companies or businesses. Therefore it is common for there to more than one trust with the same name. For example if you search for ‘SMITH FAMILY TRUST’ on the Australian Business Register you will find many examples. This is fine, asset management or distributions will never be confused as your Trust’s unique ABN will be used to identify it.

This will come down to your personal circumstances. Individual trustees are cheaper and easier to start out with, but they can make things more complicated down the track. The drawbacks of individual trustees are:

• Liability – The trustee acts on behalf of the trust and manages it. If something goes wrong the individual trustee may be liable.
• Clarity – The trustee is the legal owner of any property belonging to the trust. If the trustee ever gets into financial troubles it can be difficult to distinguish between assets held personally and those held for the trust.
• Administration – If the trustee ever changes or dies then it can cause major headaches. The legal title of all assets would have to be changes and it can cause other administrative problems.

Using a company as trustee removes all the issues with individual trustees. Directors and shareholders in the company have the benefit of limited liability, if the sole duty of the company is to be trustee then there is clarity of asset ownership, and it is easy to change the directors of the company without changing the legal title of assets.

Whether or not you need to pay stamp duty depends on the jurisdiction over the trust deed. Please see the below table on how much stamp duty needs to be paid and the governing office.

Losing an executed trust deed can have serious consequences. You can’t simply replace the trust deed, doing so is likely to create a new trust, which has tax and stamp duty implications.

You should endeavour to never lose your trust deed. Make copies, both physical and digital, of the executed and stamped deed and store them in secure locations. If the deed is indeed lost the first action you should take is to a thorough search for it, ask all parties to see if they have a copy.

If the deed is really lost then you should seek legal advice to see what you can do to continue running the trust. eCompanies stores a copy of the deed that was issued to you which may be of assistance.

We will email your trust deed in PDF format within a minute or two of your order. If after review you need to make any amendments or corrections to the deed PRIOR to signing, then you can download an editable Word version by logging into the eCompanies client area and clicking on the Trusts tab.

The primary difference between discretionary and unit trusts is how they handle distributions made by the trust.
Discretionary Trust
In a discretionary trust the beneficiaries do not have a fixed entitlement to the income or capital of the trust. Instead it is up to the discretion of the trustee to distribute income in accordance with the terms of the deed.
Unit Trust (Non fixed)
In a unit trust units are issued to unit holders. This is very similar to how shares are issued in a company. Just like company shares there may be more than one class of units which have different rights to income/capital attached to them. The rights attached to the different classes are set out in the trust deed.
Unit Trust (Fixed)
If there is only one class of unit in a trust then it is called a Fixed Unit trust. This means that each of the unit holders have the same rights in proportion to their unit holdings. This type of trust is usually formed to purchase property as they can be drafted to access the land tax threshold. If you are purchasing a trust for this purpose we highly recommend contacting a lawyer such as legalvision.

A discretionary trust is a legal agreement between different parties in which the trustee is given the power/discretion to decide which of the beneficiaries are to benefit from the trust. A discretionary trust can help protect family assets and enable income and capital to be spread among members of a family to minimise tax.

If one person is to be the sole beneficiary and sole trustee then the trust is invalid, as a person cannot hold an asset on trust for their own benefit. However, eCompanies trust deed allows for a number of people related to the the primary beneficiary to also be named by the trustee and receive benefits.

If you are in the situation where only one person is named as the trustee and beneficiary in the deed, it could be worthwhile considering a corporate trustee. If you are in this situation we recommend discussing your needs with your accountant or lawyer for professional advice.

Setting up a family trust with a corporate trustee is straight forward with eCompanies. You perform the steps in the following order:

1. Register a company as your corporate trustee if it isn’t already registered. Please note that as this company does not trade it will not require an ABN for itself.
2. Form your discretionary trust deed, during the order process you will be asked for the name and ACN of the new company.
3. Obtain an ABN for your trust, this will be in the name of your trustee company acting as trustee for your trust.
4. Perform any necessary stamping of your deed.

A discretionary trust may make a family trust election. This is an optional declaration made to the Tax Office, notifying them of the desire to be treated as a ‘family trust’ for taxation purposes. The family trust status with the ATO provides simplification of the tax rules which apply to the trust.

As part of the election the trustee chooses a particular (test) individual around whom a family group is formed. This family group sets the boundaries around who the trustee can distribute to without adverse tax outcomes. As a result the trust may become less flexible and if distributions are made to someone outside the test individuals family group they can be subject to Family Trust Distribution Tax. This is basically the maximum individual tax rate plus the medicare levy.

Not every possible beneficiary of the discretionary trust must be named in the deed as a primary beneficiary. Our deed allows for a wide range of people related to a primary beneficiary to also be eligible for distributions. The eligible beneficiaries include:

• The spouse from time to time of a primary beneficiary;
• Any child, grandchild or great-grandchild of a primary beneficiary;
• Any relative of a primary beneficiary, including but not limited to; a parent, grandparent, brother, sister, uncle, aunt, nephew or niece of a primary beneficiary or a primary beneficiary’s spouse
• The trustee of any trust or settlement of which any primary beneficiary is a beneficiary.
• Any other legal entity in which any a primary beneficiary has an interest, whether as a shareholder or director.

A Unit Trust, also known as a Fixed Trust, is a trust where beneficiaries hold units that represent a fixed interest in the trust’s assets and income. Each unit holder is entitled to a share of the trust’s income and capital based on the number of units they hold. Unit Trusts are often used in investment structures and real estate projects.

You can call your trust anything you like, however it is good practice to make the name descriptive of what it is. For example, it is better to use ‘The Jones Family Trust’ rather than just ‘Jones’. This makes it much easier for entities that deal with your trust, so they know what it is. Also remember that this name is going to appear on bank accounts, share registers.

Discretionary and Unit trusts are not registered with a governing body like companies or businesses. Therefore it is common for there to more than one trust with the same name. For example if you search for ‘SMITH FAMILY TRUST’ on the Australian Business Register you will find many examples. This is fine, asset management or distributions will never be confused as your Trust’s unique ABN will be used to identify it.

This will come down to your personal circumstances. Individual trustees are cheaper and easier to start out with, but they can make things more complicated down the track. The drawbacks of individual trustees are:

Liability – The trustee acts on behalf of the trust and manages it. If something goes wrong the individual trustee may be liable.

Clarity – The trustee is the legal owner of any property belonging to the trust. If the trustee ever gets into financial troubles it can be difficult to distinguish between assets held personally and those held for the trust.

Administration – If the trustee ever changes or dies then it can cause major headaches. The legal title of all assets would have to be changes and it can cause other administrative problems.

Using a company as trustee removes all the issues with individual trustees. Directors and shareholders in the company have the benefit of limited liability, if the sole duty of the company is to be trustee then there is clarity of asset ownership, and it is easy to change the directors of the company without changing the legal title of assets.

Whether or not you need to pay stamp duty depends on the jurisdiction over the trust deed. Please see the below table on how much stamp duty needs to be paid and the governing office.

The key differences lie in beneficiary control, entitlement, trustee discretion, and the purposes for which each type of trust is commonly used. Discretionary Trusts provide flexibility in distributions, Unit Trusts allocate benefits based on unit holdings, and Bare Trusts grant immediate ownership to beneficiaries. The choice of trust type depends on the specific goals, beneficiaries, and assets involved in the trust arrangement.

A Bare Trust, also known as a Simple Trust or Nominee Trust, is a basic form of trust where the trustee holds legal title to the assets but has no discretion or control over them.

The beneficiary of a Bare Trust has the absolute right to the trust’s assets and income. This type of trust is often used to hold assets for minors or to facilitate a specific purpose, such as holding property for someone else.

You can call your trust anything you like, however it is good practice to make the name descriptive of what it is. For example, it is better to use ‘The Jones Family Trust’ rather than just ‘Jones’. This makes it much easier for entities that deal with your trust, so they know what it is. Also remember that this name is going to appear on bank accounts, share registers.

This will come down to your personal circumstances. Individual trustees are cheaper and easier to start out with, but they can make things more complicated down the track. The drawbacks of individual trustees are:

Liability – The trustee acts on behalf of the trust and manages it. If something goes wrong the individual trustee may be liable.

Clarity – The trustee is the legal owner of any property belonging to the trust. If the trustee ever gets into financial troubles it can be difficult to distinguish between assets held personally and those held for the trust.

Administration – If the trustee ever changes or dies then it can cause major headaches. The legal title of all assets would have to be changes and it can cause other administrative problems.

Using a company as trustee removes all the issues with individual trustees. Directors and shareholders in the company have the benefit of limited liability, if the sole duty of the company is to be trustee then there is clarity of asset ownership, and it is easy to change the directors of the company without changing the legal title of assets.

Whether or not you need to pay stamp duty depends on the jurisdiction over the trust deed. Please see the below table on how much stamp duty needs to be paid and the governing office.

The key differences lie in beneficiary control, entitlement, trustee discretion, and the purposes for which each type of trust is commonly used. Discretionary Trusts provide flexibility in distributions, Unit Trusts allocate benefits based on unit holdings, and Bare Trusts grant immediate ownership to beneficiaries. The choice of trust type depends on the specific goals, beneficiaries, and assets involved in the trust arrangement.