Use advanced estate planning strategies to setup or update your Discretionary Trusts.
Five reasons to update your family discretionary trust deed
When you set up your discretionary trust it was for a specific purpose – whether asset protection, tax minimisation or to build a family wealth structure. However, like a mobile phone, what features were once popular may have gone by the wayside. It is important to have a modern up to date discretionary trust deed.
So here are our five reasons and how we use estate planning to setup or update your discretionary trust deed:
- Get a line of Appointors: Like a company the Australian Securities and Investment Commission have warned about having only one director for a company (see below for a solution on that) and the same with a discretionary trust. The Appointor is the real boss behind the trust and without a line of succession, at least two and better still 3 generations long, problems may arise if the trust is left without an appointor.
- Improved Asset Protection: It is important to ensure that there is a corporate trustee (or the trustees are exposed personally to any litigation) and that the directors of the corporate trustee have successor directors in place in the event that they become sick, disabled, die or are litigated against. The director may resign from their role and a close family member or associate can take their place to ensure continuity of business.
- Quarantining for blood relatives only: The trust you have is not built for blood relatives’ beneficiaries and protection while our modern discretionary trust deeds provide that security ensuring your children’s de facto cannot access assets in the trust in the event of separation.
- Ease of Use and Administration: Each year the Trustee must prepare detailed trust distribution minutes detailing how income from the Trust is to be distributed amongst beneficiaries. Failure to distribute all income properly means that there will be 45% tax to pay. With a modern deed tied into corresponding trust distribution minutes the task is more effective, quicker and less prone to costly tax penalties.
- Big changes happening: Each State has put in place a 2% land tax surcharge on property held in a discretionary trust that does not specifically exclude foreign person beneficiaries. Our modern discretionary trust deed upgrade does and also ensures that the accounting standards changes which require expensive “financial accounts” do not apply. Both of these recent measures in the last year can prove extra costly.
Why didn’t my lawyer or accountant setup my trust correctly in the first place?
Most lawyers and accountants think discretionary trusts have asset protection because they are unconsciously incompetent! They chose this structure firstly for tax minimisation purposes (watch out for the reclamation of unpaid present entitlements!) and secondly, for asset protection purposes by having a trustee hold the assets in trust for the beneficiaries. This is why there are more than 800,000 discretionary trusts in Australia.
The asset protection is very weak due to the way most discretionary trusts are established, particularly on death and divorce. Accountants aren’t lawyers and rely on preprepared company constitutions and trust deeds when they setup your company or trust. Also, many accountants are not comfortable in helping clients undertake estate planning as they tend to focus mostly on tax compliance. Your accountant simply didn’t know you needed this!
Lawyers tend not to pre-emptively implement these kinds of solutions unless you specifically ask, worse still they tend to be a primary beneficiary through their fees when your family seeks their advice to sort out the mess described in this article! We interviewed many lawyers and it took us a long time to find lawyers who had developed these kinds of solutions and who were prepared to make them available to clients at affordable prices.
OnVenture however have partnered with estate planning and tax experts’ lawyers who have seen the real-life examples of how these standard documents fail and have developed advanced succession and asset protection strategies within our documents to mitigate these risks! The good news is we can upgrade your existing documents without triggering a resettlement event or transferring assets causing stamp duty and CGT liabilities!
This is important to do now!
Given all of the above and our desire to ensure that our clients have the best family succession, asset protection and trust estate planning structure and strategies in place, we highly recommend that we, through our partnership with Abbott & Mourly Lawyers, prepare a deed upgrade for you or setup your next trust using these estate planning strategies. All we need is your old deed and an understanding of your line of succession of appointors and we will do the rest. Reach out to us to obtain a quote.
Interested in other succession, estate planning and asset protection strategies?
Want to learn more about our Estate Planning solutions? Check out our Estate Planning page HERE
Learn about protecting your estate with effective succession planning for your company HERE
Our Protector Solution – The ultimate family asset protection solution in life and after death HERE
Want to know more about our Legal experts we have teamed up with, see them HERE