Unit Trusts

A Standard Unit Trust is a Trust divided into units all of the same class that gives the Unit holders equal rights to vote and share in the distribution of income and capital in proportion to the number of Units held.

A Unit Trust  does not have a Settlor.

This form of Trust is a Trust with different classes of units each having different rights to share in the distribution of capital and income. Some units may have a right to vote and others may not, similar to different Shares in a company structure. Our Multi Class Unit Trust provides 13 different classes of Unit each with differing rights.

Revenue NSW’s definition of a Fixed Trust states that it is a trust where the beneficiaries (or Unit Holders) are considered to be owners of the land at the taxing date of midnight on 31 December prior to the tax year.

This type of Trust applies only to NSW. It is a standard Unit Trust whereby the unit holders are entitled to a fixed proportion of income and capital distribution from the Trust. Revenue NSW stipulates that the Deed must meet the following criteria:

• The unit holders are entitled to all income of the Trust (after the payment of normal expenses)
• The unit holders are presently entitled to the capital of the Trust and may require the Trustee to wind up the Trust and distribute the property or the net proceeds of the Trust
• Unit Holder entitlements cannot be removed, restricted or otherwise affected by the exercise of any discretion or by failure to exercise any discretion.
• There must only be one class of units issued and the proportion of trust capital to which a unit holder is entitled on winding up or surrendering of units must be fixed and must be the same as the proportion of income of the trust to which the unit holder is entitled.

If a Trust meets the requirements of section 3A of the Land Tax Management Act, then the Trust will not, for Land Tax purposes, be deemed a Specialty Trust and will be entitled to the benefit of the Land Tax threshold exemptions available in NSW.

A Hybrid Unit Trust combines a Multiclass Unit Trust with a Family Trust component to allow a Trustee to distribute to the lineal and lateral relations of the Unit Holders in addition to Unit Class related distributions.

The Patricia Holdings Unit Trust provides that 62% of the Unit Holders have the power to remove and appoint a Trustee (clause 34). This percentage is a purely arbitrary figure and could be any other percentage as long as it is a majority percentage.

To add a new Trustee is relatively simple. The appointment can be made verbally or in writing; preferably in writing. The appointment is made by a 62% majority vote of the Unit Holders. Generally the appointment is in the form of a Trust deed because a Trust deed is a more legally binding document. The additional Trustee must when accepting the appointment undertake to carry out the duties of Trustee and discharge the obligations contained in the Trust deed and at law.

Much like in a company structure, a Unit Holder can sell his or her units back to the Trustee if the Trustee agrees to re-purchase the units. Alternatively, the Unit Holder can sell them to the other Unit Holders (transfer of Units) in the Trust. If no Unit Holder wants to purchase the Units then the units may be sold on the open market if a purchaser can be found.

In a Unit Trust, the Trustee issues units to the Beneficiaries of the trust assets. There can be as few as one unit issued in a Unit Trust although, to avoid the possibility of a Unit Trust being deemed to be a Fixed Trust, there should be at least two units issued.

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 and every Nominated Beneficiary of the Trust are notified of the change of name. We can provide all the paperwork required for $187 delivered as a PDF or $220 for printed and couriered documents.

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.

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 Unit Holders);
• 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;
• The assets (or cash) are then distributed amongst the Unit Holders according to the Unit Holdings in the Unit Trust Deed;
• notice is then given to the Taxation Department that the Trust has ceased to exist.

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 Unit Holding Trust “as trustee for” the Trust

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

The Trustee must have an Australian address as they have Governance responsibility for the Trust and therefore need to be accessible to the Legal Jurisdiction under which they operate. The state or territory of Jurisdiction can be nominated, but should the Trust be subject to legal proceedings, this is only one of the factors that will be taken into account when determining the appropriate Jurisdiction for the action.

A Trust  must vest (be wound up and its assets distributed) within 80 years of being set up (except in South Australia where the Law relating to perpetuities does not apply). The Patricia Holdings Trust deed provides for the Trust to have a maximum life of 79 years. A Trust can be wound up at any time within the 79 years.

These are two totally different things – a trust is an arrangement between 2 or more parties. It is a set of responsibilities that are imposed on a nominated party (the trustee) to hold assets on behalf of another party. A company is a legal entity registered with ASIC, that exists separately from its owners (its shareholders). A company’s status as a separate legal entity gives it the same rights as a natural person, meaning it can be sued, is liable for debts and it can sue another entity.

A corporate trustee has several advantages over an individual trustee:

Immortality

A corporate trustee, being a separate legal entity, can exist indefinitely, whereas individual trustees will eventually die, may become incapacitated, or may want out for another reason.

Legal ownership of the trust assets

Assets in a trust are held in the name of the Trustee on behalf of the trust. If individuals act as the trustee of your trust and you later want to change the trustee, you will have to change the legal owner of your trust’s assets.  Conversely, you can simply change the shareholders and directors of a corporate trustee which will not change the legal owner of the trust’s assets.

Asset protection & limited liability

Individual trustees can be personally liable for any loans taken out or liabilities that the trust may incur. If a corporate trustee is used, liability will generally be limited to the assets of the trustee company itself.

A trust is not a legal entity in itself and cannot own property. Instead a trust describes a relationship between various parties whereby a trustee or trustees (the legal owner) hold trust property on behalf of beneficiaries (the beneficial owner(s)). In the context of a unit trust, the trustee holds the trust property on behalf of the unit holders. The income and distributions of the trust are split between the unit holders according to the units held.