What is a Trust? and do I need one?

What is a Trust?

In simple terms its a business structure....then after that it can get as complex as you want or need it to be.

Thankfully we have accountants in this world we live in and they love this stuff. I grabbed Dominic Myssy, head bean counter at Myssy + Co who's knows so much about them, he talks about trusts in his sleep.

According to the government definition. 'A trust is a business structure that doesn’t have an owner or owners in the traditional sense'.

The trust imposes an obligation on the trustee – a person or a company – to hold and operate the business assets for the benefit of others, the beneficiaries.

A trust is the most complex of the four standard business structures. It must have its own Australian Business Number and Tax File Number and requires a formal trust deed that outlines how the trust operates.

The Law society of NSW outlines that there are many differing types of trusts

There are many different kinds of trust. As well as the types of trust described below, trusts include superannuation funds, charitable trusts and special disability trusts.

The two main types of trusts which are used in business and by individuals are:

Discretionary (or family) trust:

A discretionary trust or family trust is the most common form used by families. The beneficiaries of the trust have no defined entitlement to the income or the assets of the trust. Each year, the trustee decides which beneficiaries are entitled to receive the income and how much they should get. For this reason, discretionary trusts have become popular in family tax planning.

Fixed or unit trust:

Unlike a discretionary trust, the beneficiaries of a fixed trust have a defined entitlement under the trust, similar to a shareholder in a company. This is usually done by dividing the trust into units in much the same way a company is divided into shares. The trustee does not have any discretion as to how they distribute the trust’s capital and income. A fixed or unit trust is often used for joint venture arrangements – for example, two families want to own an asset together.