Discretionary Trust

A Discretionary Trust is created when the ‘Settlor’ gives the trustee money or property to be held on trust for the benefit of the beneficiaries. The ‘initial sum’ is the original trust fund.

Our Discretionary Trust Deed is drafted to include a wide range of beneficiaries by reference to their relationship with the Primary Beneficiary. The Primary Beneficiary is usually the person setting up the trust for the benefit of their family, eg. the husband and wife of the family.

Briefly, Beneficiaries include:
(a) the Primary Beneficiary;
(b) each spouse of the Primary Beneficiary;
(c) each child, grandchild or great-grandchild of the Primary Beneficiary or of a spouse of the Primary Beneficiary;
(d) each parent, brother, sister, nephew and niece of the Primary Beneficiary or of a spouse of the Primary Beneficiary;
(e) each spouse of each of the persons described in paragraphs (c) and (d);
(f) each trust in which any of the persons described in paragraphs (a) to (e) inclusive is a beneficiary;
(g) each corporation of which any of the Beneficiaries is a shareholder or a director, or in which at least one share is beneficially owned by any of the beneficiaries;
(h) each trust in which any of the beneficiaries is a beneficiary; and
(i) any Charity.

Beneficiaries may include people or entities even if that person was not born or entity not in existence at the time the Trust is created.

Beneficiaries do not include:
the Settlor and any child of the Settlor for so long as that child is under the age of 18 years; or
any person or corporation which is or becomes insolvent for so long as that person or corporation remains insolvent.
You may want to consider excluding certain persons from the definition of Beneficiaries. For example, in some circumstances deeming rules in the Social Security legislation may make it necessary to exclude certain persons who are currently or intend in the future to receive Centrelink benefits.

Please advise us in the ‘other requirements’ section of our order form if there are any persons or entities you want excluded from the general definition of Beneficiary. If you want to exclude ‘Foreign Persons’ as beneficiaries please advise and we can discuss the necessary requirements with you.

The Appointor effectively controls the Trust as the Appointor has the power to appoint and remove trustees. The Appointor may be an existing trustee, a beneficiary or any other third party.

The Settlor is the person who initially gifts a sum of money or property to the trustee to establish the trust. The Settlor must be over 18 years of age and must be independent of the trustee and the beneficiaries. The Settlor can not be the Trustee, the Appointor or a potential beneficiary. Other than making the original gift of money or property, the Settlor has no other legal obligations. The Settlor is not responsible for the Trustee’s actions.

• Companies don’t die!
• Removal of most of the risk of personal liability which individual trustees are exposed to (although the directors of a corporate trustee may be personally liable in certain circumstances);
• It is easier to effect a change in control of the trust (eg. transfer shares and change directors rather than remove and appoint an individual trustee).
• No need to incur the cost of transferring assets to the new trustees or changing names on investments and bank accounts when there is a change in trustees.
• Control of the fund is more certain in circumstances of death or incapacity of key persons.

You can choose any suitable name for the discretionary trust but avoid choosing names that suggest an inappropriate connection or affiliation with or endorsement by persons, organizations or governments with which you are not involved.