Consider this if…
- You want to hold family investments or business interests through a trust
- Asset protection and flexible distributions form part of your planning
- Trustee, appointor and beneficiary roles need to be settled carefully
- Control of the trust must pass safely to the next generation
- The deed needs to work with your tax, estate and succession planning
How it works
Initial consultation
We learn about your family, assets, business interests and what you want the trust to achieve.
At the start
Structure advice
We recommend the trustee, appointor and beneficiary classes and coordinate the structure with your accountant or financial adviser.
After the consultation
Trust deed
We draft the tailored deed and establish a corporate trustee company if one is required.
After the structure is agreed
Signing and settlement
We guide signing, payment of the settled sum and any duty requirement applying to the deed.
When the documents are approved
Registrations and handover
We coordinate the relevant registrations and bank-account steps and explain how to administer the trust properly.
After establishment
What is a discretionary trust?
A discretionary trust is a legal arrangement in which a trustee holds assets for a group of beneficiaries, usually members of one family. It is called discretionary because the trustee decides which eligible beneficiaries receive income or capital, and how much, in accordance with the deed. A beneficiary does not have a fixed entitlement merely because they fall within the beneficiary class.
A trust is not a separate legal entity like a company. It is a relationship governed by its trust deed. The trustee legally holds the trust assets and enters contracts in that capacity. Many families therefore consider using a company as trustee, but the appropriate choice depends on the intended assets, activities, succession plan and professional advice.
The key roles in a family trust
Settlor. The settlor formally creates the trust by providing a small initial settled sum. The settlor is ordinarily independent of the family and should not be a beneficiary. The choice and involvement of the settlor should be confirmed with the family's legal and tax advisers.
Trustee. The trustee legally holds the trust assets, administers the trust and makes distribution decisions under the deed. One or more individuals, or a company acting as corporate trustee, may fill this role.
Appointor. Sometimes called the principal or guardian, depending on the deed, the appointor commonly has the power to remove and replace the trustee. This can make the appointor role central to practical control and succession.
Beneficiaries. These are the people and entities who may receive trust income or capital. The class may include parents, children, grandchildren, wider family members and related companies or trusts, subject to the deed.
Why families use discretionary trusts
Asset protection
Assets held by a properly established and administered trust do not belong to an individual beneficiary merely because that person may receive a distribution. This can provide a degree of separation where a family member later faces business failure, litigation or bankruptcy. The protection is not absolute: existing creditor claims, personal guarantees, control of the trust and the way it is administered all matter.
Flexible income distributions
The trustee may distribute income among eligible beneficiaries from year to year according to the deed and applicable law. This flexibility can respond to changing family circumstances. Tax outcomes depend on the facts and current law, and every annual distribution should be planned with the family's accountant before the relevant deadline. A trust may also be able to pass through capital gains in circumstances where the tax requirements are satisfied.
Flexibility as life changes
Distribution decisions can change as children become adults, family members stop work or household incomes shift. The deed does not need to be rewritten merely because the trustee makes a different lawful distribution decision in a later year.
Estate and succession planning
Trust assets generally sit outside a person's estate because they are held by the trustee rather than owned personally. What must be planned is the succession of control: the appointor role and, where there is a corporate trustee, its shares and directorships. The deed, company records and wills should be coordinated so control passes as intended.
A foundation for business and investment
A family trust may operate a business, hold an investment portfolio or property, or hold shares in a family's trading company. Holding trading-company shares through a trust can combine a company operating structure with discretionary distributions, but the legal structure must be settled alongside accounting, tax and financial advice.
Family trust setup checklist
Before establishing the trust, the family will need to settle:
- a name for the trust;
- whether the trustee will be one or more individuals or a corporate trustee, including whether a new company is required;
- an appointor and a successor appointor;
- the primary beneficiaries from whom the wider family beneficiary class is defined;
- an independent settlor and the settled sum;
- a professionally drafted trust deed that is signed and dated correctly;
- any duty requirements applying to the deed in the relevant state or territory, completed within the required period; and
- the trust's TFN, any required ABN and other registrations, together with a bank account in the trustee's capacity for the trust.
What is included in our discretionary trust service
Our service includes:
- structuring advice in consultation with your accountant or financial adviser;
- a tailored discretionary trust deed drafted by our lawyers;
- registration of a corporate trustee company, if required;
- settlor, trustee and appointor documents, including the first trustee minutes;
- guidance on duty requirements and on TFN, ABN and GST registration;
- advice on foreign-beneficiary exclusions where the trust may hold residential property;
- succession planning for control of the trust, aligned with your wills; and
- a family trust election recommendation and annual distribution-resolution guidance, prepared with your accountant.
How we establish the trust
We begin by understanding your family, assets, business interests and what you want the trust to achieve. We then recommend the trustee, appointor and beneficiary structure and explain how it fits with any company or superannuation fund.
Once the structure is settled, we draft the deed and establish a corporate trustee if one is required. We guide the parties through signing and settlement, address any applicable duty step, and coordinate the trust's registrations and bank-account requirements. At handover, we explain in plain English how the trust should be administered and which decisions need to be documented each year.
Protect what you have built
Call (03) 9427 7641 or send an enquiry to speak with a family trust lawyer. We will explain the available options and help establish the trust correctly from the outset.
This page provides general information only and is not legal, tax or financial advice. Please contact us for advice about your specific circumstances.
Frequently asked questions
Who should be the trustee, us personally or a company? And who really controls the trust?
Individuals can act as trustees, but they then hold the trust assets in their own names and may be personally liable for trust debts. A corporate trustee may help separate trust assets, limit liability in appropriate circumstances and simplify succession because the company continues when its directors or shareholders change. Practical control commonly sits with the appointor because that person can remove and replace the trustee under the deed. Many couples act jointly, but the deed should also identify who takes over if one or both can no longer act. The right arrangement depends on the family, assets and intended activities.
Can we distribute income to our children to save tax?
Age and circumstances matter. Distributions to minors are generally subject to special tax rates, while an adult beneficiary is taxed according to their own position. A distribution must be genuine: arrangements where an adult child is allocated income but the benefit returns to their parents can attract ATO scrutiny. Distribution planning and resolutions should be completed with your accountant before the relevant annual deadline.
Will a family trust protect our assets if the business fails or one of our children separates?
A trust can provide meaningful separation because a beneficiary does not personally own the trust assets, but the protection has limits. Transfers made to defeat existing creditors may be challenged, personal guarantees remain enforceable, and a court dealing with a relationship breakdown may consider trust assets and control. The result depends on the deed, who controls the trust, how it has been administered and the facts of the claim.
Should we put the family home into the trust, or buy property through it?
Transferring a family home to a trust may trigger duty and can affect the main-residence capital gains tax treatment and principal-residence land-tax treatment, so it is often unsuitable. Investment property requires a separate assessment. Trust land-tax rules may be less generous, losses generally remain within the trust, and foreign-beneficiary provisions may affect purchaser duty or land-tax surcharges in some states. Obtain legal, accounting and financial advice before signing a purchase contract or transferring property.
What happens to the trust when we die? Can we leave it to the children in our wills?
Trust assets generally cannot be left by will because the will-maker does not own them personally. The trust continues, so succession focuses on the appointor role and on the shares and directorships of any corporate trustee. If those elements are not coordinated, control may pass to an unintended person or become disputed. We align the deed's succession provisions with the corporate records and wills so the intended people can assume control.
Related services
Call (03) 9427 7641 or send an enquiry to speak with a family trust lawyer.
Protect what you have built