Archives: Investax FAQs

Usually, Appointors are considered as a team, called joint appointors, unless we’re told otherwise. With joint appointors, if one person, let’s say Husband, is no longer there, the other person, in this case, Wife, takes over everything related to the trust. It’s like a last-person-standing situation where the surviving appointor becomes the boss of the trust.
In some trusts, there’s a special person called the independent appointor; This person is often an accountant or legal representative. They work alongside two other appointors, who make decisions together. However, once both regular appointors pass away, the independent appointor also steps down from their role.
This rule is in place to make sure that the accountant (or any other independentappointor) and their family don’t end up having complete control over the trust.

the role of the appointor holds paramount significance within the trust structure. This person has a lot of power because they can choose who runs (the trustee) the trust and can also remove them if needed. In other words, Appointors can remove the Trustee of the Trust.

No, the current state legislation only covers residential property. Please consult with your accountant before applying this exclusion.

As per our legal team who creates the Trust deed, the potential danger lies in whether the powers of the appointor can be considered as property If they are categorised as such, a trustee in bankruptcy, for instance, might have the ability to acquire and use these powers to appoint a trustee responsible for distributing assets to creditors, among other tasks. Unfortunately, it remains uncertain whether a trustee in bankruptcy has this capability.
However, even if this were possible (which is still unclear), an appointor is expected to exercise their powers in line with their fiduciary duties, meaning they should act in the best interests of all the trust beneficiaries.
Ultimately, this is a complex legal matter that requires specific legal advice. Nonetheless, as per our current deed, the office of an Appointor will be vacated if that Appointor:
(a) becomes bankrupt or seeks relief under bankruptcy laws; or
(b) acts as a trustee in bankruptcy, liquidator, administrator, or the Family Court
Registrar;
This provision is designed to enhance the trust’s security in case an appointor faces legal action.
Furthermore, having an independent appointor, like a trusted family accountant or
solicitor, can also bolster the trust’s security. This is because the deed mandates that appointment decisions must be made jointly, requiring unanimous agreement among the appointors.

Depending on the relevant state, if you are purchasing Residential Property in a trust and do not exclude foreign beneficiaries from the discretionary trust, you may incur a surcharge.
This exclusion is irrevocable for foreign persons. We recommend excluding foreign beneficiaries from your trust if your intention is to purchase residential property, regardless of the state, to avoid any unforeseen surcharges imposed by state legislation.

The Beneficiary of the Trust has beneficial ownership over the Trust property – essentially, it is for their benefit that the Trust has been created and administered.
In a Discretionary/Family Trust, beneficiaries do not have a fixed entitlement to the Trust's assets; instead, the trustee has the discretion to decide which beneficiaries receive Trust assets and the amounts they receive. However, this discretion is subject to the limitations outlined in the Trust Deed. While the trustee holds legal title to Trust property, they also bear equitable obligations to the beneficiaries, as specified in the Trust Deed. Beneficiaries in a Discretionary Trust can be categorized into two groups: Primary (or Specific/Designated) Beneficiaries, who are explicitly named in the Trust Deed, and Secondary (or General) Beneficiaries, who are determined based on their relationship to the Primary Beneficiaries, including certain family members, companies, and trusts controlled by the primary beneficiaries.
If you are setting up a Trust with your partner, both of you can be designated as
primary or named beneficiaries, ensuring equal benefits for both.

Most States and Territories have a rule that requires trusts to end after 80 years at the latest. This rule, known as the ”rule against perpetuities” ensures that assets can’t be tied up in a trust indefinitely. This is generally called vesting date.
South Australia abolished the rule against perpetuities some years ago, but even
there, any beneficiary can request to end the trust after 80 years. In all other States, this rule remains in place. The deed we facilitate has an 80-year vesting date so the trust must come to an end within 80 years.

We recommend a corporate trustee company due to the greater level of asset protection it provides. In contrast with an individual trustee, a corporate trustee allows for greater separation of trust’s assets and the personal assets of the directors and shareholders.
It also offers advantages in terms of lifespan and succession planning. If the directors or shareholders of the corporate trustee change, the entity remains the same, eliminating the need to transfer assets to another entity (avoid both CGT or Stamp Duty for the Transfer). Moreover, a corporate entity provides limited personal liability for its directors and shareholders regarding the company’s actions. In the event the trustee company cannot meet its debts, it may enter into liquidation, but the personal assets of directors and shareholders enjoy better protection. Asset management becomes more straightforward with a corporate trustee, as trust assets and personal assets are held in separate names.

The Settlor is the individual who “settles” a discretionary trust by transferring the settled sum to the Trustee (or Trustees).

The Settlor must also actually transfer the settled sum. If they fail to do so, the Trust will not come into existence. For a trust to be established, there must be trust property. In most situations, this trust property originates from the settled sum.

 

It’s considered best practice to appoint a close, yet unrelated, family friend as the Settlor. Our Legal team do not allow relatives of the beneficiaries or trustees to act as Settlors. The Settlor should be someone who will never benefit from the Trust. The trust deed specifically prohibits the Settlor from benefiting. This stipulation mainly prevents adverse tax consequences, as indicated in S.102 of the ITAA 1936. It also eliminates the risk of the Trustee inadvertently violating the trust deed by distributing assets to the Settlor.

There have been instances where the legitimacy of an entire trust was challenged because it was discovered that the Settlor (e.g., an accountant) charged a fee for the settled sum. This meant the sum was never genuinely gifted to the Trust, resulting in the absence of trust property, rendering the Trust nonexistent.