Protecting your assets
Trusts are a legal relationship whereby a trustee is appointed to hold and manage assets for the benefit of the beneficiaries. Though trusts are not considered to be a legal entity, they are treated as such for tax purposes.
When properly used, trusts can help to plan finances, protect assets, minimise tax and limit liability. The use of offshore trusts can also provide a higher level of protection and privacy due to the nature of the regulations in that jurisdiction.
There are different types of trusts available and this area of law can be highly complex. You should seek expert legal advice to ensure that the trust is established and managed properly. Our highly experienced business lawyers are able to assist with a wide range of trust issues and help you to understand the implications for your business and personal circumstances.
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A trust is not a legal entity, however it is viewed as such by the ATO. A trustee can carry on a business for the trust and the trust must obtain an ABN. As many as 5% of businesses in Australia are through a trust.
In addition to any legal and accounting fees for setting up the trust, you may also need to pay stamp duty, depending on where the trust is established. You can find information with the relevant state government bodies by following the links below:
The trustee is appointed to legally own and manage the trust property. This could be a natural person or a company, which is called a corporate trustee. Being appointed as a trustee carries obligations, responsibilities and potentially a high level of risk. You should seek legal advice before being nominated as a trustee.
An appointer is responsible for appointing the trustee. They have the power to remove the trustee or appoint replacements in cases of death, incapacitation or removal.
The settlor transfers the first property to the trust and must be unrelated to and receive no benefit under the trust. This can usually be a friend, lawyer or accountant.
Finally, the beneficiaries, receive the benefit of the trust property.
A trustee can be one of multiple beneficiaries under a trust, but they cannot be the sole beneficiary. This is because they would essentially be holding property for the benefit of themselves.
Using a company to act as trustee can be useful in so far as it can limit liability and offer greater asset protection. It is best to use a new company that has not previously traded to ensure the company has no outstanding liabilities that could effect the trust assets.
If the company goes into liquidation there is a risk that the assets of the trust could be sold to satisfy creditors. This area of law is nuanced and requires expert legal advice.
Establishing trusts in offshore jurisdictions can provide greater asset protection and privacy as well as confer tax benefits. This is because the regulations in other jurisdictions may limit the potential legal actions creditors can take against the trust or the information that can be obtained about the trust.
Disclaimer:
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