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Standard Discretionary Trust

The following parties are involved in a Discretionary (or Family) 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. However, the appointment of the initial Trustee is made pursuant to the Deed of Settlement and the Appointor has no power to make this first appointment.

The Appointor (or the legal personal representatives of a deceased 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. There is no necessity for a discretionary trust to have an appointor. It is simply a mechanism to provide for accountability of the Trustee.

 

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 and capital 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 who is a beneficiary, that person may not be the sole Trustee of the Trust.

If the trust has trade creditors, or has borrowed funds and is unable to meet its debts, the trustee will be pursued by the creditors of the trust to make good the shortfall. For this reason, and depending upon the proposed use of the trust, there may be some merit in using a corporate trustee. However, the director(s) of the corporate trustee may also be pursued if the assets of the corporate trustee are insufficient to satisfy creditors' claims.

 

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 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. Additionally, if any person transfers or sells any asset to the Trust for less than its full market value, that person becomes a notional settlor and is similarly prohibited thereafter from receiving any type of distribution from the Trust.

 

BENEFICIARY

This is the description given to any entity who receives any distribution of income or capital from the trust fund by the Trustee. The beneficiary may be a person (including a minor), a company, the trustee of another trust, a charity, etc.

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 expression refers to the situation which is deemed to have arisen when a new beneficiary is added. The ATO holds that the addition has created a new Trust. The deemed creation of the “new” Trust has stamp duty and capital gains tax implications.

 

PRESENTATION

A deluxe, economy, reduced and green presentation choice is offered. The comparison and the price differential is detailed in the package comparison.

 

DELIVERY

A discretionary trust ordered today will normally be dispatched within two business days of our receipt of your order.
 

OTHER QUESTIONS

We are always happy to answer your questions, on any aspect pertaining to your discretionary trust.

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