Basic steps for establishing a trust fund

Date: Aug 30, 2012

Establishing a trust fund is perhaps an intimidating undertaking, especially when you consider the complicated tax structures surrounding it.

A discretionary family trust is  an important part of sound estate planning and a good way of not only setting aside money, but also reducing the tax that you have to pay on that money.

To establish a trust, you will often have yourself and spouse (if applicable) and you both will be appointers and trustees. An appointer is someone who appoints the trustee who is to control the trust and should often be importantly be you (and your spouse if applicable) because an appointer can also dismiss the legal owner (trustee) of the trust.

To initiate the trust, a person known as a ‘settlor’ deposits an amount – often $10 - in the account.

The beneficiaries are anyone and everyone whom the trustee wants to benefit from the fund.  If the fund is established while you live, it can continue after you die.  It is also possible to establish funds and trusts within a will. It’s important to note that beneficiaries can only access the fund on the basis of the rules establishing the fund.

The difference between a discretionary trust and a testamentary trust is that the latter is a trust accessible only after the trustee has died. There is a difference between a testamentary trust and simply leaving property to people in a traditional will.  However a will can be vulnerable as your assets may change through divorce or debt and as a result the intended beneficiary/ies may lose out.

Often a trust is not as vulnerable to these things , but you should always seek legal advice before making any decisions in relation to the establishment of a trust.

Estate planning is an important part of life and shouldn’t be put off. Establishing a fund of some description is one such way of ensuring that your loved-ones are protected.