When structuring a business or planning wealth distribution, selecting the right trust can make a significant difference in achieving financial goals, ensuring tax efficiency, and protecting assets. Trusts provide flexibility, security, and strategic advantages tailored to diverse needs. Whether you’re safeguarding your family’s legacy, supporting dependents, or planning for intergenerational wealth transfer, understanding the types of trusts available is essential. 

Here is an overview of various trust types that could be used for business, investment or family purposes, each offering unique benefits and applications.

Overview of Trust Types

• Family Discretionary Trust: This trust allows trustees to allocate income or capital to any beneficiary at their discretion. Beneficiaries do not have fixed entitlements, which allows flexibility in distributions and can offer asset protection.

• Direct Descendants Trust/Bloodline Trust: This is similar to family trusts, but distributions are restricted to direct descendants (e.g., children and grandchildren). This limits tax planning options but ensures assets stay within the immediate family.

• Unit Trust: Beneficiaries (unit holders) have a defined, fixed interest, making it ideal when specific proportions of income or capital need to be distributed, often used in investment or business partnerships.

• Fixed Trust: A variation of unit trusts, fixed trusts restrict trustee discretion and ensure beneficiaries have fixed entitlements. They provide tax advantages, especially for land tax purposes in certain jurisdictions.

• Testamentary Trust: Set up through a will, these trusts come into effect upon the benefactor’s death. They benefit tax planning and asset protection, especially for minors who can access normal adult tax rates on income.

• Child Maintenance Trust: This trust is useful for satisfying child support obligations. It allows income to be taxed at adult rates, with distributions not taxed in the parent’s hands. It also provides asset protection for the children’s support.

• Superannuation Proceeds Trust: This trust receives superannuation death benefits for dependent beneficiaries, keeping funds out of the estate to minimise estate challenge risks. Income to minors is taxed at adult rates, offering tax benefits.

• Special Disability Trust: Used to support disabled beneficiaries, it allows assets and income to be exempt from Centrelink means tests, providing essential support without impacting government benefits.

Each trust type has specific purposes, benefits, and limitations that depend on the business’s needs, family structure, and tax planning strategy. Consulting with an advisor is recommended to tailor the choice of trust to specific circumstances and compliance requirements.

Selecting the right trust is pivotal in safeguarding your assets and achieving your long-term financial objectives. At DFK Everalls, we can provide the right advice to help you tailor a trust structure that aligns with your unique circumstances and future aspirations. Contact our team today to ensure your business, investments, family, and legacy are protected with the most effective solutions. Let’s build your path to financial security together.