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Same person as the sole trustee and sole beneficiary of a discretionary trust?

Discussion in 'Legal Issues' started by Ichigo, 7th Oct, 2015.

  1. Ichigo

    Ichigo Well-Known Member

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    From what I've read so far about discretionary trust:

    "The sole trustee cannot be the sole beneficiary because a trust is a legal relationship between a trustee and the beneficiary or beneficiaries. If a sole trustee were also the sole beneficiary, then this would be an agreement that a person had with themselves. The law says that no trust can exist in these circumstances."

    Options I've found so far:
    1. A trustee can be a beneficiary of the trust as long as there is at least one other beneficiary as well.
    2. Consider having a corporate trustee.


    Would somebody be able to advise on:
    1. Are the above options sound?
    2. What other option(s) might be available?
    3. I couldn't quite understand the last sentence of the below statement about corporate trustee. Can anybody elaborate on that?
    "A corporate trustee can be the beneficiary of the trust - as long as you include the trustee's name and their capacity. For example, 'ABC Pty Ltd in its capacity as the trustee of the ABC Family Trust'. In this case, the trustee is effectively a beneficiary of the discretionary trust for the beneficiaries of the trustee's own trust."

    Thanks :)
     
  2. Greyghost

    Greyghost Well-Known Member

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    Register a company as trustee.
    You: director and secretary of company (possibly shareholder)
    You: beneficiary etc of trust,

    I wouldn't get confused with the corp trustee being a beneficiary of the trust.
    If you DID distribute trust profits to the trustee, then the trustee was litigated, the undrawn benefits of those distributions could be called upon in a litigation, hence why the trustee company's assets are limited to usually the $1 share.

    There is no extra accounting fees in having a corporate trustee, just the annual ASIC fee of $243.
    If you run a small business and then also have a property in another trust, I would recommend having a corporate trustee in the property trust
     
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  3. D.T.

    D.T. Adelaide Property Manager Business Member

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    1. Always use a company as trustee
    2. Depends who else you have; partner can be some of the roles. Think about what you're trying to achieve and why.
    3. When writing its name on contracts, documents, applications etc it is usually written as ABC pty ltd atf XYZ trust. Atf stands for 'as trustee for' to indicate company is acting on behalf of trust rather than as a company itself.
     
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  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Sounds like something written by an accountant!

    Doesn't make sense.
     
  5. D.T.

    D.T. Adelaide Property Manager Business Member

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    Especially that last sentence, was like gibberish
     
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    It would be extremely unusual for a discretionary trust to have just 1 beneficiary. It would approach a bare trust if that were the case, unless the trustee had powers to accumulate.

    The options are sound, but another simple option is to have an open class of beneficiaries - you and current/future spouses, children, brothers sisters uncles etc.
     
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  7. Ichigo

    Ichigo Well-Known Member

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    Thanks guys :)

    I will (after getting legal advice as well):
    A. use a company as trustee
    B. have another person as a beneficiary
    C. find out more about having an open class of beneficiaries to decide if it better suits me than option B.
     
  8. RPI

    RPI Property Lawyer, Town Planner Business Member

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    Check with your broker about B. Having someone else listed as a primary beneficiary can make lenders want to have then give a personal guarantee for any finance
     
  9. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    There would also be much less asset protection for a discretionary trust with just one beneficiary (or two)