FAQ Articles

Who can be the Trustee of a Family Trust?

Any individual, company, or incorporated association can be a Trustee provided that the person or directors are not bankrupt, minors, or disqualified persons.

If a Beneficiary of a Family Trust is a Trust, who is to be named as the Beneficiary?

Much like holding shares in a company, as a Trust is not a legal entity, it cannot be named as the beneficiary. Instead, it should be listed as the Trustee of the Beneficiary Trust "as Trustee for" the Trust.

Can the Settlor be a Beneficiary?

No, for two reasons:

1. Section 102 of the Income Tax Assessment Act 1936 provided that if the person who establishes a Trust (the Settlor) has the power to terminate a Trust (that is, is the same person as the Trustee and in some cases a Beneficiary) then the Trust will be deemed not to exist and the Settlor will be personally taxed on the whole of the Trust income.
2. If the Settlor is a Beneficiary then the Settlor will not have divested him/her self of the Trust assets and as a consequence no Trust relationship can exist.

Can a sole personal Trustee be a sole Nominated Beneficiary?

Generally speaking, no. There must be a difference between the legal person of the Trustee and the legal person of the Beneficiary to enable a Trust to exist. However it can validly be argued that in all Family Trusts, because there are General Beneficiaries as well as Nominated Beneficiaries, the answer is they can be. It is Patricia Holdings experience though that most Banks refuse to lend to a Trust where the Trustee is one and the same as the sole Nominated Beneficiary.

How is a Family Trust wound up?

A Trustee winds up a Trust by:

• making a Declaration (in writing) that the Trust is to vest (that is the Trust ends and the Trust assets be distributed to the Beneficiaries);
• collecting in all of the Trust assets and converting them into cash (unless the Trustee proposes to make an in specie distribution);
• all debts of the Trust must be paid and all tax must be paid;
• if the Trust is a Family Trust, the Trustee must exercise a discretion and determine who among all the Beneficiaries is to receive the Trust assets;
• the assets (or cash) are then distributed;
• notice is then given to the Taxation Department that the Trust has ceased to exist.

Does a Family Trust have to have a Trustee?

Yes, every Trust  must have a Trustee. This is because the law requires that for a Trust to exist there must firstly be some Trust property and secondly, it is the Trustee (or Trustees) who hold the Trust property on Trust for a Beneficiary or Beneficiaries (there must be a separation between the legal and equitable ownership). A Trust is not considered a legal entity.

How is the name of a Family Trust changed?

Patricia Holdings can help change the name of your Trust. The Trustee elects to change the name of the Trust and then confirms that election in writing. A Trustee must ensure that if a Trust changes its name that every person who has business dealings with the Trust deed and every Nominated Beneficiary of the Trust is notified of the change of name. We can provide all the paperwork required for $187 delivered as a PDF or $220 for printed and express posted documents.

Who are the Additional General Beneficiaries?

The Additional General Beneficiaries are Beneficiaries who don’t fall within any of the categories as defined by “General Beneficiaries”. These could be a neighbour or a close friend.

Our order form invites you to nominate “Additional General Beneficiaries” if you choose. Individuals or entities named as Additional General Beneficiaries are Beneficiaries of the trust but do not benefit from the lineal or lateral provisions that the Nominated Beneficiaries enjoy. I.e. the Trustee has no discretion to distribute income or capital to related individuals or entities related to the “Additional General Beneficiaries”.

A Charity can be an Additional General Beneficiary.

What is the minimum amount of a settled sum?

Any amount however small can be the settled sum. It can be as low as $1.00, commonly it is $10.00 or $100.00. It is a good idea to make the settled sum sufficiently large so as not to be completely absorbed by Bank Fees. What a Trustee must be ever vigilant for is to ensure that the settled sum is properly receipted into the funds of the Trust and accounted for throughout the life of the Trust. This is because if the settled sum is never paid to the Trustee as the seed capital of the Trust then the Trust never comes into existence.

How do you remove a Beneficiary?

This depends entirely upon the wording of the Trust deed. Most Trust deeds provide that there are two ways of removing a Beneficiary:

1. the Beneficiary by document in writing renounces his or her interest as a Beneficiary (a Renunciation may be mandatory if the change is made in conjunction with a Centrelink Declaration); or
2. the Trustee makes a declaration that henceforth a particular Beneficiary will no longer be a Beneficiary. The Trustee should carefully study the Deed to make sure that the Trustee has that power. The Patricia Holdings Deed does give the Trustee the power to remove a Beneficiary. The Trustee should be very careful when removing a Beneficiary not to create a re-settlement.