Should I have a discretionary or unit trust involved in my business structure?
In a unit trust, the income of the trust is distributed according to the units owned, in much the same way as shares in a company. Such trusts are therefore often called fixed trusts.
A trust can co-exist with any other business structure. Company, partnership and sole trader structures often operate businesses incorporating a discretionary trust for tax, asset protection and succession reasons.
With respect to tax, discretionary trusts have the capacity to distribute in a tax effective manner income unrelated to personal exertion.
A business asset can be held in a trust for the same reason it is often held in a company, namely to separate the asset from the trading risk of the business using that asset.
In terms of succession, trusts are very useful in passing the control of assets between members of a family group. As the assets are owned by the trust, not the trustee, there are no transfer costs upon a change of the trustee of the trust.
Trusts are not particularly good vehicles, however, for transferring assets outside of a family group, as the beneficiaries of the trust will generally not include the members of the family of the purchasers of the assets.
Shareholders and partners may hold their interests in a company or partnership as trustees of a trust.
What are the rights and obligations of the trustee of a discretionary trust?
A trustee is legally liable to all those with whom it deals. Trustees have a range of duties called fiduciary duties, as well as statutory duties under the Trustee Act and elsewhere. At the core of these duties is the requirement that the trustee acts prudently and in the best interests of the beneficiaries of the trust at all times. The trustee must keep proper records and accounts and ensure that the trust complies with all of its legal obligations, such as with respect to tax.
However, a trustee will normally have an indemnity from the trust fund, except, perhaps, to the extent that the trustee is negligent or fraudulent. In other words, if the trustee commits itself to a contract, it is entitled to meet its obligations from the trust fund. If it is sued pursuant to that contract, any damages payable as a consequence of such an action can, possibly subject to negligence and fraud, come from the trust fund.
Our Business and Commercial Lawyers
He helps clients deal with the practical, strategic and operational needs of their businesses, conservation of their assets, activating community and philanthropic interests and planning for succession to their estate over time.
Michael applies a multidisciplinary approach in dealing with the challenges of achieving growth, asset protection, estate governance and succession. Methodologies finessed with experience are applied, paving a way forward for globalising businesses as well as families making plans to manage their wealth for the benefit of subsequent generations.
Jeremy’s clients over the years have included corporates, banks, property developers/managers, financial advisory firms, representative bodies and private clients.
Proficiently tri-lingual, Clarence is an experienced Private Client lawyer who is skilled in working with clients of diverse backgrounds and has extensive knowledge of business dynamics and trade practices. He has acted in or advised on disputed matters for clients with an Asian background including Singapore, Malaysia, South Korea, Taiwan, Hong Kong and mainland China.
Trusts disputes and Litigation – Clarence has represented large-scale international companies in Trade Practice and fraudulent activity matters. He has represented individual clients in relation to caveats, partnership disputes, contested estates and injunctions.
Commercial Law – Clarence helps clients deal with their wealth preservation and succession objectives for their commercial enterprises. He works for a diverse range of manufacturing distribution and retail market-focused businesses. Clarence also helps his clients deal with the legal issues that flow from the operations, management, planning and decision making processes as well as ownership of their commercial enterprises.
- Advising on business succession planning.
- Advising on tax implications in estate planning and property law such as stamp duty concessions, land tax and capital gains tax.
- Assisting clients with residential and commercial conveyancing.
- Advising on the succession of discretionary trusts and self-managed superfunds.
- Drafting and settling discretionary trusts.
As a fluent Hindi speaker, Zabina has the capacity to assist clients from the Indian community.
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