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Bridges Financial Services

Is a family trust a good solution for you?

19 Mar 2019

Family trusts can help you protect your assets, manage your family’s tax more efficiently and enable you to provide an income stream to a vulnerable family member.

To decide whether a family trust could be good for your family it’s important to understand how they work and the advantages and disadvantages.

What is a family trust?

A family trust is a trust that commences during your lifetime to manage certain family assets or investments and to support family member beneficiaries. The trust is governed by a trust deed which sets out the trust’s rules. A trustee is appointed to manage it and is legally responsible. The trust deed and the trustee determine how income generated is distributed amongst beneficiaries.

Who can be beneficiaries of a family trust?

Beneficiaries of a trust must be family members. That is, your spouse, siblings, parents, grandparents, children, nieces and nephews. In addition, your spouse’s family, any family companies, other family trusts and registered charities can be beneficiaries.

What are the advantages of family trusts?

Asset protection

Family trusts can protect family assets from future marriage breakdowns, challenges to a Will or bankruptcy because the assets belong to the trustee and not the individual. Therefore, they are less likely to be included as part of a property settlement than if they were held by an individual. They can also assist in avoiding challenges to a Will or being used to pay creditors (unless the assets were placed in the trust to avoid creditors).

Retaining important family assets within a family group, for example a farm, can also be a good reason to hold assets in a family trust.

Protecting vulnerable family members

Family trusts can help protect vulnerable family members who may make unwise spending decisions if they controlled assets in their own name. You can provide a spendthrift child with a periodic income but not access to a large sum that could be easily spent.

Tax benefits

Family trusts may also provide tax benefits to help the family group manage the tax liabilities of the family unit as a whole. This can be particularly useful when supporting adult children who are studying or older parents who are retired as they are likely to be on a low tax bracket.

There are also disadvantages in establishing a family trust including tax outcomes, expenses and management difficulties if family disputes arise.

If you’re interested in finding out more about establishing a family trust, please contact your financial adviser.

Source: Australian Executor Trustees

Take the next step

To discuss your financial situation, make an appointment with a Bridges financial planner.

We have an established alliance with Bridges, to provide our customers with financial advice. Bridges has been helping Australians with financial advice for 30 years.

A Bridges financial planner will develop a plan specifically for you; one that’s tailored to your needs and circumstances to help you achieve your goals.

To make an appointment with a Bridges financial planner, call Credit Union SA on (08) 8202 7777. The initial consultation is complimentary and obligation free.

Bridges Financial Services Pty Ltd (Bridges) ABN 60 003 474 977, ASX participant, AFSL No 240837. This is general advice only and has been prepared without taking into account your particular objectives, financial situation and needs. Before making an investment decision based on this information, you should assess your own circumstances or consult a financial planner. Examples are illustrative only and are subject to the assumptions and qualifications disclosed. In referring members to Bridges, Credit Union SA does not accept liability or responsibility for any acts, omissions or advice provided by Bridges or its authorised representatives. Bridges is part of the IOOF group.

Bridges pays up to $1,500 for business placed with Credit Union SA members and other people referred to Bridges by us. For investments placed before 1 July 2019, we also receive a trailing commission of up to 0.20% per annum of all funds held under management in The Portfolio Service on behalf of such people. The trailing commission ceases on 30 June 2021 or prior if no funds are held in the applicable platforms.

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