Discretionary Trust and Unit Trust

Key Features of Discretionary Trusts

1. Flexibility in Distribution

   • Discretionary trusts, also known as family trusts, provide trustees with the discretion to decide how income and capital are distributed among beneficiaries. This flexibility allows for tax planning and asset protection.

2. Asset Protection

   • Assets held in a discretionary trust are generally protected from creditors of the beneficiaries, as the beneficiaries do not have a fixed entitlement to the trust assets.

3. Tax Efficiency

   • Trustees can distribute income to beneficiaries in a tax-efficient manner, taking advantage of lower marginal tax rates. This can result in significant tax savings for families.

4. Control

   • The trust deed outlines the powers of the trustee, who is responsible for managing the trust and making distribution decisions. The appointor, often the person who establishes the trust, can replace the trustee if necessary.

     
     

Key Features of Unit Trusts

1. Fixed Entitlements

   • In a unit trust, beneficiaries (unit holders) have fixed entitlements to the income and capital of the trust based on the number of units they hold. This structure is similar to shareholders in a company.

2. Investment Opportunities

   • Unit trusts are commonly used for investment purposes, allowing multiple investors to pool their resources and share in the profits and losses according to their unit holdings.

3. Transferability

   • Units in a unit trust can be transferred or sold, providing liquidity and flexibility for investors.

4. Regulatory Compliance

   • Unit trusts may be subject to specific regulatory requirements, particularly if they are used for managed investment schemes.

The Importance of Engaging an Experienced Lawyer

1. Expert Advice on Trust Structure

   • Lawyers at Dojo Legal Australia provide expert advice on the most suitable trust structure based on your specific circumstances and goals. They help you understand the legal and financial implications of each option.

2. Drafting and Reviewing Trust Deeds

   • An experienced lawyer ensures that the trust deed is comprehensive, clear, and tailored to your needs. This includes outlining the powers of the trustee, the rights of beneficiaries, and any specific conditions or restrictions.

3. Compliance and Regulatory Assurance

   • Lawyers ensure compliance with relevant laws and regulations, such as the Trusts Act and tax laws, reducing the risk of legal issues and penalties.

4. Tax Planning and Efficiency

   • Engaging a lawyer helps you understand the tax implications of the trust and plan accordingly, ensuring tax efficiency and compliance with the Australian Taxation Office (ATO) requirements.

5. Risk Management and Asset Protection

   • Legal professionals identify potential risks associated with the trust and develop strategies to mitigate them, protecting your assets and interests.

6. Ongoing Legal Support

   • Beyond the initial setup, lawyers provide ongoing legal support, helping you navigate changes in regulations, trust management, and any disputes that may arise.

Discretionary and unit trusts offer distinct advantages for asset management, tax planning, and investment in Australia. Engaging an experienced lawyer from Dojo Legal Australia is essential for making informed decisions, ensuring compliance, and protecting your interests. With their expertise, you can confidently establish and manage a trust, focusing on achieving your strategic objectives while leaving the legal intricacies to the experts.

Do you have additional questions regarding setting up a Family Discretionary Trust or Unit Trust? Please feel free to contact us by email at admin@dojolegal.com.au, or by phone on +61 02 9138 0688 to arrange a consultation with our experienced lawyers.