(Vesting) Winding Up a Trust

Assume that in the past the trust used to hold property which has been sold and now there's only some cash in the bank.

How does one go about voluntarily winding up a discretionary/unit/hybrid trust? Is it the same process for each? Roughly how long does this usually take? Are there any legal and tax consequences to consider? What does the ATO do when someone decides to wind up a trust?

 

The trust would end if all assets are discharged. Does the trust have any liabilities ? If so the residual cash may discharge that in whole or in part. The issue of tax compliance to finalise lodgements is one other matter. Also if a company is trustee it can then be wound up, if required and it performs no other tasks and has no assets etc itself. Form 6010 (ASIC)

Units and Hybrid Trust may need to discharge the units. The unitholder may or may not incur a CGT loss.

 

Trustee should read the deed and distribute Corpus to relevant be beneficiaries and thus wind up the trust.

Ago should be then notified and tfns etc cancelled. Final tax return lodge and then trustee wound up if need be

 

Not in this position yet but was asking for the future.

Roughly how much would a lawyer charge to do all the documentation required to wind up/vest a trust? I also presume that tax returns will need to kept being done up until the financial year that the trust vests, even if all assets have been discharged a few years prior.

 

I would charge $660 if the trust has no assets other than cash

 

A trust can often be ended with no documents. I have seen trusts ended unintentionally and people werent even aware they did it. But if the trust is being wound up to bypass, avoid etc any legal or financial obligations I would seek legal advice first. If its trivial assets and all parties are closely held and co-operative its likely a trivial issue. Tip - A trust with no assets isnt a trust. A deficient of assets over liabilities may or may not be more complex - Seek legal advice. The trustee / Directors may become personally liable for some trust liabilities if its done incorrectly. This often occurs in tax disputes.

 

If a discretionary trust only has cash when vesting, do the beneficiaries liable for income tax upon receiving the cash distribution from the trustee?

 

Are the beneficiaries...
They are only liable for taxable income. transferring cash is not taxable income in itself. But if the trust has made a family trust election it could still result in tax if they are not part of the family group.

 

Does tax advice indicate this is either
1. A CGT issue
2. A distribution of income ?

 

Thank you Terry and Paul.
This is a proceeds from sale of a property but no capital gain has been made on the sale.

 

The loss may be of benefit to carry forward for future use for investment purposes