Purchasing a new home is an excellent time to consider forming a Family Trust. You can form a Trust at any time, but the purchase of a home is a cost-effective time to form a Trust, because the legal and bank requirements can be completed with the purchase of the house.
A Trust is created by Deed which sets out its powers and places obligations and responsibilities on its Trustees.Trusts can provide you with flexibility for the benefit of your family and protecting your assets.
What are Settlors, Trustees and Beneficiaries?
A Trust has a “Settlor” who establishes the Trust and may transfer assets to it, “Trustees” who hold the assets on behalf of the beneficiaries and are responsible for the decision-making, administration and distribution of the Trust’s assets, an “Appointor” who has the power to ‘hire’ and ‘fire’ and “Beneficiaries” who can take benefit from the Trust. Sometimes one or more people in the Trust may be Settlors, Trustees, Appointor(s) and/or Beneficiaries.
If you are a business owner, a trust can protect your private assets from business risk. We commonly recommend operating a business through a Company with the shares in that Company owned by the Trust. Once assets are owned by the Trust, generally the assets are beyond the Settlor’s creditors provided the Settlor was solvent when the assets were transferred. You may even find that there are some Tax advantages to a Trust.
Protecting your family for the future
One of the other great features of a Family Trust is the flexibility it allows you to benefit your family. By law a Trust can run for 80 years, which means that it can be formed for your lifetime and for the succession to your next generation, as the Trust continues past your lifetime.
What happens when I die?
If you have a trust, your will can leave your residual estate to the Trust. This allows your Estate to be wound up in a timely (and potentially cheaper) manner instead of having on-going costs for the administration of an Estate. By transferring your assets to the Trust during your life-time you can also save arguments over your Will.