7 Family Trust Benefits

There are a number of great Family Trust benefits.

They help anyone looking to protect their hard-earned wealth. They’re not just for very rich people. They help manage and secure your money for the future.

They let you divide your assets and income in a smart way. This can give you tax benefits and help you plan for your family’s future. It also gives you a safety net against any money problems.

By making a family trust, you can make your financial future safe. It’s something you might not have thought of before.

Overview of Family Trust Benefits

Let’s delve deeper into these Family Trust benefits.

Benefit 1: Tax Planning and Minimising Tax

Imagine reaping family trust benefits like legally cutting down your tax bill. That’s where family trusts shine.

Family trusts serve as a secret weapon for intelligent tax planning. But, this applies only to investment or business income.

While you can’t divert your salary, you can channel your investment income. You can send it to family members who earn less. This tactic can reduce your investment tax rate.

Tax Benefit Examples

Imagine this scenario: your family trust owns a rental property. The rent doesn’t just go into your pocket. It can go to a family member in a lower tax bracket, such as a non-working spouse or a student. As a result, you pay less tax and keep more money in your family’s pocket.

Now, consider a high-earning couple. Their investment income would usually face hefty taxes. But, if they use a family trust for investments, they get more choices. They can distribute some income to a company they own. The result? A friendlier 30% tax rate.

Benefit 2: Flexibility in Distribution:

Family trusts provide flexibility, a key advantage amongst the many family trust benefits. This helps in dealing with life’s ups and downs. The trustee determines the division of the trust’s income and capital gains within the trust.

This flexibility is helpful in many situations. For example, if the main person earning money in your family takes time off work. The trust can cover basic expenses for a break, further education, or parental leave.

This helps to lessen money worries. It makes sure the family has enough for necessary costs during this time. This support can significantly help the family’s overall well-being.

Flexibility is also helpful in hard times. Suppose a beneficiary faces financial difficulties due to an unexpected job loss or health emergency. The trust can give more income to them, offering a safety net when they most need it. Or if a family member has a significant capital loss. A capital gain can be distributed to help offset this.

Benefit 3: Estate and Succession Planning

Family trust benefits also encompass powerful tools for future income and succession planning.

They let parents give control of the trust to the next generation. This doesn’t trigger capital gains tax (CGT) and stamp duty.

Parents can plan future income for their children’s studies. This adds to financial security. Assets stay within the trust, not given away as per a will. This holds true even when a parent dies. The beneficiaries keep getting benefits from the family trust. This avoids many usual estate planning issues.

Benefit 4: Safeguarding Your Assets

Lion cub with paw on golden bars, symbolising the protective nature of a family trust and the provision for family members

Considering family trust benefits, have you thought about protecting your assets from unexpected life events? Family trusts offer that protection. They serve as a shield to guard your hard-earned assets.

The trustee, not the beneficiaries, holds the trust’s assets legally. This is beneficial during bankruptcy or unpaid debts. It makes it difficult for debtors to try and claim these assets.

Family trusts can help you from the impact of marriage breakdowns. In a divorce, assets in a family trust might stay safe. These assets might not enter any property settlement. Assets in a family trust do not form part of a deceased estate. So, they can avoid potential Will disputes.

Benefit 5: Looking After Your Loved Ones

Family trusts do more than protect assets. They also help safeguard your loved ones. This is especially useful for those who need to improve at managing money.

Consider a child with a habit of overspending or gambling. A family trust allows them access to income. However, it keeps large capital sums out of their direct control. This prevents rapid spending.

Benefit 6: Capital Gains Tax Discount

People often choose discretionary trusts to hold assets. These assets may increase in value over time. Capital Gains Tax (CGT) is a tax you pay when you sell an asset for a profit. This could be an investment property or shares.

A key advantage of a family trust is eligibility for a 50% CGT discount. This applies to assets held over a year. Companies don’t have access to this benefit like trusts and individuals. You can ‘stream’ this capital gain across beneficiaries. This depends on their particular situation and tax profile.

When a trust distributes a capital gain, a beneficiary can use it. They can combine it with their own capital losses. This reduces their tax liability.

This adaptability with capital gains is another testament to the family trust benefits, making them ideal for holding assets that might appreciate.

Benefit 7: Carry forward losses

Family trusts handle losses much like companies. You can’t share these losses with beneficiaries. Therefore, the beneficiaries won’t need to paid for any losses. The trust rolls these losses forward to offset gains in future years.

Consider when investments yield a small income from franked dividends. Other losses may have already offset this income. If it remains positive, it can come with numerous franking credits.

Beneficiaries have two options:

They can seek a refund for excess franking credits.
Alternatively, they can utilise these credits to lessen tax liabilities on other income.

Carrying forward tax losses can be complex, especially for discretionary trusts. But, it becomes simpler for trusts with a family trust election. People often recommend this for family and private groups.

As always, seek professional guidance for tax matters. It ensures you get maximum benefits and comply with all rules.

Summing Up

Family trust benefits are powerful tools for securing your financial future.

They help cut taxes, especially on investments. By allowing flexible income distribution, trusts can adapt to life’s ups and downs.

They’re also great for estate planning, passing on wealth without extra taxes. Plus, they protect your hard-earned assets from financial disasters.

Trusts look out for loved ones, helping those who struggle with money. They offer a tax break on assets that grow in value, and they manage losses well, offsetting them against future gains.

For anyone serious about wealth management, exploring the benefits of a family trust is a must.

Always consult with a professional for the best results.