The Family Trust protects assets and saves tax

A Family Trust is a popular vehicle set up by accountants and financial planners. This is as both a wealth creation and protection tool:

1. each year pay trust income to family members on low marginal tax ratesFamily Trust

2. protect assets from creditors

3. succession planning - no CGT or stamp duty when you die

Your adviser and accountant have many strategies. They can set up loans from the trust to family members to buy investments. This delivers wider tax breaks. Or they can invest in insurance bonds to access lower aged care fees. Legal Consolidated's Family Trust is cutting edge to allow your accountant and adviser to seek all tax savings.

A family trust is a discretionary trust. It is Australia's most popular way of holding family's assets or running a family business.

A Family Trust is a legal instrument that creates an entity where you are able to hold assets and you can reduce the amount of tax paid on those assets. It is also for the protection of the assets. It is an extremely valuable tool.

Pay less tax - hunt down family members not paying tax

The Appointor is usually mum and dad. The Trustee is often mum, dad or their company. The Appointor tells the Trustee who gets the trust income each year.

For example, Mum is earning a lot of money. She pays a high tax rate. Stay at home Dad earns no income. The children at university earn only a little income from part time jobs. The Family Trust merely distributes the yearly income to these beneficiaries on low incomes. The tax rate is as low as zero. Next year one of the children finishes at university and gets a job. They now pay a high marginal tax rate. Not a problem. The Family Trust does not distribute to them. Every year you hunt down family members on low tax rates.

Family Trust beneficiaries include mum and dad, their company, adult children, children's spouses, grandchildren and their spouses. When required, capital is distributed to beneficiaries carrying forward capital losses. This is called streaming.

Reduce land tax

Own more than one property? The more property in one person's name the higher the marginal land tax rate. Instead, hold each property in a separate Family Trust with a different Trustee. You, therefore, take advantage of the tax-free threshold for each property. Secondly, you pay a lower marginal tax rate for each property.

Company vs Family Trust - CGT concessions trapped in a company

Family Trusts often hold appreciating assets such as shares or land. CGT relief flows through to the beneficiary. Capital gains are taxed at concessional rates. In contrast, when you dispose of an asset out of your company the CGT concessions are lost. You can't get them out of a company.

Also, when a trust makes a capital gain, 50% of the amount is tax-free. This is provided that the asset is held in the trust for over 12 months.

Will vs Family Trust - you can't challenge a Family Trust

Marriages, divorce, spendthrift children and conniving children-in-law can't touch the assets in your Family Trust. In contrast, many people including parents, children and grandchildren can challenge your Will. Except for NSW, the Family Trust quarantines assets from your Will.

A Will and anything that forms part of an estate is contested. However, a Family Trust is a separate entity. The trust assets are generally protected.

Superannuation vs Family Trust - super traps your money

Flexibility is another advantage. Unlike a superannuation fund, your assets are not locked away.

Often your accountant and financial planner maximise your super contribution levels first. They then put surplus funds into the Family Trust.

Why is it called a 'discretionary' trust?

A discretionary trust is often called a Family Trust or Family Discretionary Trust. It gives the Trustee (acting under the Appointor) huge discretion.

Each financial year the Appointor will tell the Trustee who to distribute to. This is as to whether and to which beneficiaries to distribute the income and capital of the trust.

Until the Trustee exercises its discretion, the beneficiaries have no interest in the trust property. This means that your children have little power to try to get money out of the trust.

Every year the Trustee can decide who gets trust income. The Trustee hunts down beneficiaries on low tax rates and uses those low tax rates to pay less tax. The beneficiaries rarely see any money out of the trust. Each year they merely forgive the debt by signing a Debt Forgiveness Agreement.

Trustee vs Appointor?

There is only one power in a Family Trust. That person is the Appointor.

The Settlor primes the trust with a few dollars - to get it started. It is heard of no more.

The Trustee is merely the Appointor's puppet.

The beneficiaries get nothing out of the trust. This is unless the Appointor tells the Trustee something different. The Default Beneficiaries only get something if the Appointor forgets to tell the Trustee to distribute income and capital (this almost never happens).

Advantages in building a Legal Consolidated Family Trust

Our lawyers are elite taxation and trust lawyers. We hold professorships and doctorates in these areas. We ensure:

1. Streaming – franking credits, attribution and separate accounts to reduce CGT & income tax, complies with Thomas v FCT [2017] FCAFC 57
2. Bamford’s Case – definition of Net Income – satisfies ATO
3. Loss Recoupment – retain and stream losses to particular beneficiaries
4. Appointors to act unanimously – so two Appointors can’t take the assets over the 3rd Appointor
5. Bank loans to the Family Trust – the required bank clauses and Indemnity rights (CBA, NAB, ANZ & Westpac)
6. Bank loan Compliance Certificate signed on our law firm’s letterhead

What do I get?

Within seconds of building the Family Trust Deed online you get via email:

1. Family Trust Deed setting out the rules of your trust, naming the Trustees and Appointors
2. Minutes to set up the Trust, as required by your accountant and the ATO
3. Trust Opinion Certificate on our law firm's letterhead, signed by one of our lawyers
4. The law firm's covering letter confirming our law firm build the Family Trust Deed

Telephone us if you need help answering the questions.

See also:

Update the Family Trust for Bamford streaming only:

legal consolidated

Or, update Bamford streaming PLUS update the rest of the Deed:

Or update for Bamford streaming PLUS the Deed PLUS update the Appointor & Trustee:

Or just update the Trustee:

Or just update the Appointor:


To set up a new Family Trust Deed:

To prepare the Annual Trust Distribution Minutes:


To deal with Division 7A (loan or UPE from your company to the Family Trust):

Or, to forgive the 'loan account' and UPEs (loans from humans to Family Trust):


Change the name of your Family Trust:

To wind up and vest the Family Trust, when you no longer want it:


Telephone us for legal advice on building this document.

Adjunct Professor, Dr Brett Davies, CTA, AIAMA, BJuris, LLB, Dip Ed, BArts(Hons), LLM, MBA, SJDFamily Trust Distribution Statement
Legal Consolidated Barristers and Solicitors
National Australian law firm

Toll free: 1800 141 612
Mobile: 0477 796 959
Email: brett@legalconsolidated.com
Skype: brettkennethdavies