Investment Trusts and Family Trusts

Many families and investment partners create family trusts and unit trusts to hold their portfolio of assets.

In a family trust, a family member can set aside assets for the future benefit of their family, with accruing gains on that invested sum being allocated to whomever the trust rules decide is entitled to receive them. They are usually set up as:

  • “testamentary trusts”, where a late relative can leave their estate to the benefit of certain family members, to accrue until certain events happen, such as, say, like a grandchild turning 21.
  • “inter vivos trusts”, which literally means “during life” trusts. These are set up by family members to set aside their wealth for the benefit of their family now.

In a unit trust all benefits are distributed to each unit holder in relation to their set ownership percentage from the start. People like to set these up when starting ventures between different business partners, where discretion on who to distribute to is not wanted – everyone wants their fair share. The most common unit trust structure people would be used to is the classic managed fund investment, or listed property trust.

Some keys points about trusts in general:

  • Any earnings that are made by a trust are usually distributed to each beneficiary while only losses are trapped inside. This is where a trust differs from a company since a company can trap income and losses for future years at fixed tax rates.
  • The government has many laws about loans to trusts, distributions from trusts and trust losses.
  • Do you undertand the ins and out of your trust? There can be some confusion in how to properly administer them.

We can help to discuss the pros an cons of the different options available. Our experience in dealing with trusts can resolve many issues and provide clarity in the operation of your current or new trusts. Contact us to discuss.