What is a Discretionary Trust?

A Discretionary Trust is a legal structure in which a person or company (the trustee) holds property for the benefit of other persons (the beneficiaries).

The trustee is the legal owner of the trust property and the beneficiaries hold the beneficial interest in the trust property.

Discretionary trusts allow the person or people managing the trust to choose who can benefit from the trust and how much money beneficiaries will receive.

The amount of money beneficiaries receive under a discretionary trust is not fixed (like in a Unit Trust). The trustee chooses the amount from year to year. 

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What are the benefits of a Discretionary Trust?

A Discretionary Trust can offer a number of different benefits including:

  • Asset Protection – a trust structure helps to safeguard your personal assets.
  • Flexibility over capital and income distribution – the trustees can use their ‘discretion’ to distribute income to the beneficiaries as they see fit.
  • Tax benefits – including a 50% discount on Capital Gains Tax (CGT) and the ability to vary distributions each year to effectively reduce total income tax for the beneficiaries.
  • Estate Planning
  • Accumulation  of assets for beneficiaries

Why do I need Business Structuring Advice?

Not all business structures are equal. When starting a business, it can be tempting to choose the easiest or cheapest option. This isn’t always the best idea in the long run. 

We’ll consider what your business is going to be used for, who’s involved, your plans for the future, tax implications, and ongoing requirements. You’ll then receive specialised advice from us about which structure is going to best suit your business and protect your assets.

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Frequently Asked Questions

There are four key players involved in setting up a trust:

  1. The Settlor – this person sets up the trust – usually a lawyer or accountant. Normally once the trust has been setup they are no longer involved.
  2. The Trustee – The trustee is the legal owner of the trust property although not the beneficial owner. The trustee decides how to manage the trust.
  3. The Appointor – This person has the power to remove and nominate trustees. Usually, this will happen when a trustee passes away or otherwise cannot continue to manage the trust.
  4. The Beneficiaries – the beneficiaries are the people (or entities) that benefit from the money or property held in trust. The beneficiaries do not have ownership over the trust assets, but they have the right to be considered when the trustee makes decisions about distributing money or property from the trust.

Every situation is different, which is why you need expert advice from a commercial lawyer. We’re small business specialists, so you know you’re in safe hands with us.

We’ll consider your unique situation and let you know if we think this is right for your business.

Our head office is at Inspire Cowork – a coworking space in Sydney – but we also support flexible work for our team. Our lawyers can work from anywhere.

We use technology to come to you, wherever you’re located around Australia. Many of our clients work from home or at coworking spaces, just like us.

We communicate with our clients via phone, email and Zoom – whatever works best for you. There’s no need to meet face to face, but if you’re ever in the area you’re welcome to drop in!

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