Establishing a Trust    

Before your trust can be established, consideration needs to be given to:

• What assets you want to put into the trust?
• Who you want to benefit from the trust?
• Who you want to run the trust?
• A name for the trust.

A trust deed is then drawn up and sets out the rules for the trustees to follow in managing the trust.   When preparing the deed, we will ensure that it is specific to your current needs and provides for flexibility later on.

Once the trust deed is signed, the person setting up the trust (settlor) will then sell any assets at their full market value to the trustees to look after for the beneficiaries.  The assets cannot just be given to the trust without attracting gift duty – the trustees must buy them from the settlor.  Usually, the purchase price is left owing by the trustees to the settlor as an interest-free debt (unless interest is demanded by the settlor) repayable upon demand.  The debt is then reduced  by the settler making gifts to the Trust of $27,000 per 12 month period (a couple can gift $54,000 per 12 month period). This is the maximum amount a person can gift in any 12 month period without incurring gift duty.

Any assets transferred to the trust will be registered into the names of the trustees.  In effect, you no longer own the assets yourself, the trustees do.  From thereon, all the trustees must agree with any decision concerning the trust’s assets and all the trustees must sign any necessary documentation.

You will also need to prepare a memorandum of guidance which contains instructions to the trustees as to how you want the assets of the trust dealt with after your death.  While not legally binding, the trustees will usually follow the wishes of the settlor contained in the memorandum of guidance.  In preparing the memorandum of guidance, thought needs to be given to:

• How and when you want the beneficiaries to benefit from the Trust;
• What stage you wish for your children to take control of the Trust if you have died;
• Who you would wish to benefit from the trust fund if you have died without leaving any issue surviving you.