What are the Advantages of Setting up a Family Trust?
Placing assets in Trusts can have many benefits. These many include:
- Protection for assets such as your home, business or investments;
- Availability of long-lasting protection spanning generations for up to 80 years (and sometimes longer) – but they can be short lived too if required;
- Protection from claims against your assets by creditors, for instance in the case of bankruptcy;
- Protection from claims against family members by their creditors in relation to assets you intend passing on to them;
- Protection against matrimonial property claims in appropriate cases, not just in relation to yourself, but also in relation to other family members eg. children or grandchildren;
- Assisting with the management of your assets and affairs at the time in the future when you or your spouse or partner or other family members are not able to do so, either through age or illness;
- Protection for you and/or for other family members in appropriate cases if faced in the future with “means tested” health, hospital, rest home, or superannuation payments or surcharges;
- Avoidance of fragmentation of family assets;
- Great flexibility in dealing with unknown future requirements and circumstances;
Are There Any Disadvantages in Setting up a Family Trust?
Yes there are. However, with modern trusts they are relatively few. They include:
- There is paper work and cost involved in establishing a Trust;
- There is also some extra paper work and cost required in administering the Trust in the future;
- There may be additional costs relating to accounting if the Trust is a trading Trust and is active in business or has investments income;
- Assets which used to be in your name are now in the name of yourself and another (or others) as Trustees: these assets now belong to the Trust;
- The desirability for legal reasons of having a person from outside the family involved as a Trustee (although there can be practical advantages in this).
Legal practice and requirements involving Trusts have changed in recent times and modern Trusts offer more flexibility than they did in the past. In particular, most Trust Deeds will now permit assets to be transferred back to you at a later stage, provided the trustees (who will probably include you) agree.