What is a Discretionary Trust?
An arrangement set up by a Deed of Settlement (a Trust Deed) that permits a Trustee to hold assets for a Beneficiary or Beneficiaries and to distribute income and capital as the Trustee determines to a broad range of beneficiaries of the Trust.
What is a Standard Unit Trust?
This is a Trust divided into Units of a single class, giving all Unit Holders equal rights to vote and share in the income and capital of the Trust in proportion to the number of Units held.
What is a Multi-Class Unit Trust?
This is a Unit Trust with different types of Units which give the different Unit Holders differing rights to share in the income and capital of the Trust with some Units having the right to vote and other Units not having the right to vote.
What is a Fixed Unit Trust for NSW Land Tax purposes?
This is a Trust which takes the form of a Unit Trust but specifically provides that the Unit Holders must be entitled at all times to receive the income of the Trust, the capital of the Trust and have the power at any time to wind up the Trust. Such a Trust is not classified as a Specialty Trust for New South Wales Land Tax purposes and therefore entitles the Trust to the benefit of the Land Tax Threshold Exemption available in New South Wales.
Care should be taken before establishing such a Trust because of the above requirements, the fact that the Trustee has no discretion concerning the distribution of capital and income and because the Unit Holders are treated as Secondary Beneficiaries for the purposes of New South Wales Land Tax.
What is a Hybrid Trust?
A Hybrid Trust is a Unit Trust which incorporates the features of a Discretionary Trust with the Trust being divided into classes. This enables Units to be issued in much the same way as a Standard Unit Trust or a Multi-Class Unit Trust but for the Trust also to have a class of Units that are totally discretionary permitting income and capital to be distributed amongst the Unit Holders as determined from time to time by the Trustee.
Do I have to have a Settlor and what does a Settlor do?
Yes, to establish a Discretionary Trust there must be a Settlor. A Settlor is a person who makes a gift of money to set up the Trust. This person must not be a Beneficiary of the Trust either directly or indirectly and must not hold any other role or office in the Trust.
What is the minimum amount of a Settled Sum?
The minimum amount is $ 1.00
Do I have to have an Appointor and what does an Appointor do?
Yes, a Discretionary Trust must have a mechanism for the removal and appointment of a Trustee. The most common way of doing that is to appoint a person (named the Appointor) when the Trust is established. That person has the power to remove a Trustee and appoint a new Trustee. The Appointor should not be the same person as a Sole Trustee because of the conflict of interest that can arise.
Do I have to have a Trustee and what does a Trustee do?
Yes, it is essential in any form of Trust that there be a Trustee. The Trustee owns the Trust property but owns it only for the benefit of the Beneficiaries. Unit Holders in a Unit Trust are the Beneficiaries of a Unit Trust, Members of a Superannuation Fund are the Beneficiaries of a Superannuation Fund and the Beneficiaries of a Discretionary Trust are the Named Beneficiaries or anybody who can come within a broad class of individuals, Companies and other Trusts that are described in the Trust Deed.
Who are the Additional General Beneficiaries?
Additional or General Beneficiaries are Beneficiaries who fall within the description of who Beneficiaries may be in a Trust Deed. Typically the General Beneficiaries would be persons who are in some way (and often quite distantly) related to the Named or Nominated Beneficiary or Beneficiaries and may include Companies, Trusts, Superannuation Funds and the like in which a Nominated or other General Beneficiary have an interest. A General Beneficiary can also be a Charity.
Can I change the Trustee of my Trust?
Yes, but subject to the particular provisions that may be in your Trust Deed. Care should be taken in the case of a Trust which owns real estate in New South Wales to make sure that the Deed provides (or is amended at the appropriate time to provide) that a Retiring Trustee cannot at any time be a Beneficiary of the Trust.
Patricia Holdings in conjunction with its Solicitor will ensure that the paperwork removing and appointing a new Trustee is done correctly and in accordance with the requirements of a particular Deed as every individual case is different and is reviewed by our Solicitor.
What is the minimum number of Units I can have in my Unit Trust?
The minimum number of Units you can have in your Unit Trust is one.
How do I update my Binding Death Benefit Nomination?
You need to complete another Binding Death Benefit Nomination form. This will replace the original Nomination. A Binding Death Benefit Nomination must be updated every three years regardless of whether any changes need to be made, this is because a Binding Death Benefit Nomination only lasts for three years.
When should my Self Managed Superannuation Fund be updated?
Patricia Holdings recommends that you review your Superannuation Fund Deed every two years and update it at least every five years. This is because some older Deeds may not allow the Fund to act or take advantage of current legislation. Some Deeds are not legally required to be updated to take advantage of the various legislative changes that have taken place in Superannuation over the past few years, but can be updated to have the benefits included in the Deed.
Can I change the name of my Deed?
Yes you can. This is done by Minute of the Trustee. The Trustee can either do this itself or Patricia Holdings can do it on behalf of the Trustee. See our Trust Deed Secretarial Services for more details.
How long does a Trust last for?
A Trust must vest (be wound up) and the assets of the Trust distributed to the Beneficiaries within a period of eighty years. For this reason most Trusts are given a life of seventy nine years from the date of when the Trust Deed is first signed. A Trust can have a life which is less than seventy nine years, but this would have to be specially requested.
How do I end my Trust?
A Trust is ended (vested) by the Trustee making a determination that it is time to bring the Trust arrangement to an end. The Trustee makes a resolution (in writing) to that effect, then having made the resolution, sells all of the Trust property, distributes the proceeds of the sale between the Beneficiaries (in the case of a Discretionary Trust this can be the Beneficiaries as selected by the Trustee), files all necessary Tax Returns up to the date of termination, cancels its Tax File Number and, if applicable, cancels its GST registration, Australian Business Number and PAYG tax registration.
Most Trust Deeds permit the Trustee to wind up the Trust and distribute the assets of the Trust in specie instead of having to sell and distribute the proceeds of sale.
