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How to Set Up a Family Trust (2021 Update)

How to Set Up a Family Trust (2021 Update)

Setting up a family trust requires careful planning and an understanding of how trusts operate. Find out how to get started here.

16th February 2021
Reading Time: 4 minutes

Key points

  • The first thing to decide when setting up a family trust is who the beneficiaries and trustee will be
  • It’s also important to use a Trust Deed
  • You will need to apply for an ABN and TFN


A trust is a legal relationship where one party holds something for the benefit of another. The person who holds the trust property is called the trustee, whilst those who receive the property are called beneficiaries. Trusts can be helpful way to structure your finances, especially if you run a business or want to distribute property to family members. A trustee can also be a beneficiary of a trust, but cannot be the only beneficiary. 

What is a family trust?

A family trust is a type of discretionary trust that is created for the benefit of family members. Family trusts can be made:

  • Where there’s a family business
  • To hold family assets
  • To protect assets
  • For tax purposes
  • To avoid challenges to a family member’s will 

Whilst having a family trust can be a good way to organise your finances, you must first understand how it operates and what you will need to do to create it the right way.

1. Determine the trustee(s)

The decision to name a trustee is a complex process that includes weighing and balancing personal preferences and also your circumstances. A trustee can be a non-professional individual (family member), a professional individual (such as a lawyer, 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 who is also aware of all trustee obligations eg. good faith, duty to act in the best interest of beneficiaries, etc.

2. Determine the beneficiaries

Beneficiaries possess a right to trust income or other trust property. The trust deed determines the extent of their entitlement (income, property, or other) and the nature of their entitlement (fixed amount or percentage or at the trustee’s discretion). The Trust deed also can define the class of person that can qualify as a beneficiary within the trust (e.g. family member, corporate bodies, foreign persons etc.).

3. Draft a discretionary trust deed

For your trust to be active, you need to draft a legally binding discretionary trust deed. As trust arrangements can be complex and tailored to your circumstances, it is recommended that you contact a lawyer for a professional review of the trust deed’s suitability to your needs.

4. Settle the family 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 also be someone like a close friend or someone who has no further involvement after the settlement.

5. Sign 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.

6. 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:
Note: the information below is indicative only and may not reflect the most current regulations.

StateMailing AddressCostPayment MethodAdditional Information
NSWNeeds to be stamped by a registered OSR lodger.$500 ($10 per additional stamped copy).Inquire with Lodging Agent.Stamp within 3 months from date of execution.
Click here for more information.
VICNeeds to be stamped by a registered Duties Online Agent$200 (No charge for additional copies).Inquire with Lodging AgentStamp within 30 days from the date of execution.
Click here for more information.
ACTStamping not required.Stamp duty is not payable.N/ANo time limit imposed for stamping.
Click here for more information.
QLDStamping not required.Stamp duty is not payable.N/ANo time limit imposed for stamping.
Click here for more information.
SARevenue SA
GPO Box 1353
Adelaide, SA 5001.
Stamp duty is not payable, but deeds may still be stamped ‘exempt’.N/ANo time limit imposed for stamping.
Click here for more information.
WAStamping not required.Stamp duty is not payable.N/ANo time limit imposed for stamping.
Click here for more information.
NTCommission of Taxes
GPO Box 154
Darwin, NT 0801
$20 ($5 per additional copy).-Cheque
Stamp within 60 days from the date of execution.
Click here for additional information.
TASSRO Tasmania
GPO Box 1374
Hobart, TAS 7001
$50 (no charge for additional copies).-Cheque
Stamp within 90 days from the date of execution.
Click here for additional information.

7. 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.

8. Open a separate bank account

The final step is to open a bank account for the trust. It should be opened in the 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.

9. 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.

If a family business is involved, you should have any documents reviewed by a lawyer. With LawPath, you can request obligation free, fixed-quotes from our network of legal professionals.

Don’t know where to start?
Contact a Lawpath consultant on 1800 529 728 to learn more about customising legal documents and obtaining a fixed-fee quote from Australia’s largest legal marketplace.

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.