Follow these steps to create a Family Trust:

Determine the trustee(s)

The decision to name a trustee is a complex process that includes weighing and balancing the various factors according to personal preferences and circumstances. A trustee can be a non-professional individual (family member), a professional individual (such as an attorney, an accountant or an investment adviser), or a corporate fiduciary (such as a bank or corporate advisory firm). They need not be related, and in some circumstances it is inadvisable to select a close relative. You need to find someone with integrity but at the same time should also be aware of all the trustee obligations eg. investment; obligation to act in the best interest of beneficiaries, etc.

Determine the beneficiaries

Choosing a beneficiary is an effective way to plan the distribution of your estate after your death. The process requires consideration of both the amount of money at stake and the beneficiary’s ability to handle a potential windfall. For example, if you name your two children as beneficiaries, and one dies, his or her share could go either to his or her children or to your remaining child. You may name anyone you chose as a beneficiary of a Family Trust, even if he or she is not a family member.

Determine the assets that will make up the trust fund

Some assets you may wish to place in your Family Trust include real estate, vehicles, saving accounts, investment accounts, life insurance proceeds, stocks and bonds.

Draft discretionary trust deed

This step is where a customised trust deed will be drafted. With LawPath this is easy as filling out a form and can be done under 30 mins. You can create a discretionary trust deed for free using our software.

Settling the trust

A settlor, one who must sign the deed and ‘settle’ the trust property, creates the trust deed for the benefit of the beneficiaries. This process requires the settlor to provide a small initial sum (usually $10) to the trustee. A settlor is typically unrelated to the beneficiaries and may be someone like a close friend and one who has no further involvement after the settlement.

Signing the trust

After the trust is signed by the settlor, the trustee(s) must hold a meeting agreeing their appointment as trustee(s) of the trust and accepting to be bound by the terms of the trust deed.

Stamp Duty

Stamp duty differs state by state and so applications are different within states and territories. In New South Wales, stamp duty of $500 is payable within three months of the trust being established.

The costs of stamping your discretionary trust are as follows:

  • WA – Nil
  • ACT – Nil
  • NSW – $500.00 (due 3 months of the date of the deed)
  • NT – $20.00 (60 days of date of deed)
  • QLD – Nil
  • SA – Nil
  • TAS – $20.00 (due 3 months of the date of the deed)
  • VIC – $200.00 (due 30 days of the date of the deed)

Apply for ABN and TFN

Upon establishment of the trust, an Australian business number (ABN) and tax file number (TFN) should be made for the trust. With LawPath you can get your ABN within 24 hours.

Open a separate bank account

The final step is to open a bank account for the trust. The account should be opened in name of the trustee ‘as a trustee for the trust.’ The first deposit into the account should be the settlement sum. This sum should be there before any other deposits or transactions are made.

Important Information if you own a Family Business

Family trusts are not just for tax purposes but also for management purposes of a family business. Family businesses are often set up as a trust so that each family member can be made a beneficiary without having any involvement in how the business is run.  The key in setting up trusts for family businesses is flexibility. Trusts allow parents to distribute wealth to children in a more measured and controlled fashion. For family business owners, the business usually represents the bulk of the family’s wealth. The transfer of ownership of that asset from one generation to the next in a tax-efficient manner can very often be the difference between keeping the business in the family or being forced to sell it. The bigger the business, the more a trust can help owners control how the business is run, by whom and for what purposes after they retire or die. In some cases, one child may be interested in running the business, while others want to sell it. In those circumstances a trust can be a particularly good option.

Unsure where to start? Contact a LawPath consultant on 1800LAWPATH to learn more about customising legal documents, obtaining a fixed-fee quote from our network of 600+ expert lawyers or to get answers to your legal questions.

Dominic Woolrych

Dominic is the CEO of LawPath, dedicating his days to making legal easier, faster and more accessible to businesses. Dominic is a recognised thought-leader in Australian legal disruption, and was recognised as a winner of the 2015 Australian Legal Innovation Index.