Class Discretionary Trust
Class Discretionary Trust
Although the imminent tax treatment of Discretionary Trusts will become a little less attractive than now applies, this structure is hard to beat for:-
- quarantining assets from creditor attack;
- flexibility of income and capital distribution;
- differential distribution of income during the life of the trust.
The following parties are involved in a Class Discretionary Trust:-
APPOINTOR
This entity, either one or several individuals or a company, has the ultimate control in the operation of the Trust. The function of the Appointor is to “hire and fire” the Trustee of the Trust - except the initial Trustee.
The Appointor (or the legal personal representatives of the Appointor) may delegate its powers to another entity. The Appointor may resign by giving written notice to the Trustee. If this is the case, the Appointor's notice may nominate its successor. If no successor is nominated, the Trustee becomes the Appointor.
TRUSTEE
This entity, either one or several individuals or a company, is charged with the responsibility of administering the Trust, including investing the Trust Funds and deciding to whom the distribution of Trust Income is to be made. Any decisions made by the Trustee should be minuted and retained with the records of the Trust.
The assets of the Trust are held in the name of the Trustee - in its capacity as Trustee for the Trust.
The Trustee may resign from its role by tendering its resignation to the Appointor.
Where there is only one person named as a beneficiary, that person may not be the sole Trustee of the Trust.
SETTLOR
This entity, either one or several individuals or a company, is only involved in the establishment phase of the Trust. The Settlor invites the Trustee to accept the position as Trustee and gifts an amount of money (the Settlement Sum) to the Trustee upon the Trustee's acceptance of its position as Trustee of the Trust. The Settlement Sum is a nominal amount, usually $10.00 or $20.00.
The Settlor, his estate and any corporation or trust in which the Settlor or his estate has any interest, may not be a Beneficiary nor the Trustee of the Trust and, ideally, is not a member of the family for whom the Trust is being established. The most suitable Settlor is a friend of the family.
BENEFICIARY
This is the description given to any entity who receives any distribution of income of the Trust from the Trustee. The Beneficiary may be a person (including a minor), a company, the Trustee of a Trust, a charity, etc.
In our Class Discretionary Trust, we provide for Group A, Group B and Group C Beneficiaries. The Trustee is required to distribute income in equal part to each Group of beneficiaries (who are regarded as tenants in common) - but is at liberty to distribute at his discretion within each Group.
Primary Beneficiaries
These are the entities who are specifically nominated in the Schedule of the Trust Deed. It is common that, in a Family Trust, the Primary Beneficiaries are the Mother and Father of the Family. The definition of the Primary Beneficiary automatically includes the spouses of the nominated persons.
Secondary Beneficiaries
These entities include the grandparents, parents, brothers, sisters, children, stepchildren, grandchildren, nieces and nephews of the Primary Beneficiaries and the spouses of those persons.
Tertiary Beneficiaries
This category includes any company or trust (including a superannuation fund) associated with any of the Beneficiaries as well as charities, etc.
It is important to “capture” as many beneficiaries as possible upon the formation of the trust. To add beneficiaries at a later time will cause the Trust to be re-settled. This is an expression which means that a new Trust is deemed to have been formed upon the addition of new beneficiaries. The deemed creation of the “new” Trust has stamp duty and capital gain tax implications.
PRESENTATION
Both a deluxe and an economy presentation choice is offered. The comparison and the price differential is detailed in the package comparison.
DELIVERY
Under normal circumstances:-
* For clients in metropolitan Melbourne, a discretionary trust ordered today will be delivered within 24 hours of our receipt of your order.
* For clients in country Victoria or interstate, delivery will normally take 48 hours.
Delivery to any location in Australia is free.
OTHER QUESTIONS
We are always happy to answer your questions, on any aspect pertaining to your discretionary trust.