What is the name of the Trust?

You are free to choose a suitable name for your Discretionary Trust. The name should be appropriate in terms of reflecting the nature of the Discretionary Trust's business (if any), its purpose or the identity of the trustee.

You should avoid choosing names that suggest an inappropriate connection with or endorsement by persons, organisations or governments with which you are not involved.

Cleardocs cannot give you any advice about this.The summary here is information only. It is provided by Maddocks.

Which jurisdiction's laws apply to the Trust Deed?

When choosing which jurisdiction applies to the Discretionary Trust Deed, your answer will have the effect of an agreement between the Trustee and Settlor defining the laws of which state will apply to the Discretionary Trust Deed. You should choose the state in which the Discretionary Trust Deed is executed.

Other relevant considerations may be the location of the Discretionary Trust's business (if any) or its Trustee.

If this question becomes relevant in the future, the parties' intention will not be determinative of the issue of jurisdiction but it may be relevant.

Cleardocs cannot give you any advice about this.The summary here is information only. It is provided by Maddocks.

What is the name of the settlor?

Maddocks advises that the settlor of a Discretionary Trust must be an independent person. That person or his or her spouse or children cannot be beneficiaries and should not be trustees.

A settlor will often be a family friend or a solicitor or an accountant who will not be a beneficiary or a trustee.

Do not specify anyone as settlor who is to be a beneficiary or trustee or whose spouse or children are to be beneficiaries of the Trust. This strengthens the position of the Discretionary Trust if any questions later arise concerning the impartiality of the settlor or the motives for settling the Trust.

Maddocks advises that you should seek legal advice or call the Cleardocs helpline to ask for a referral to Maddocks before choosing a settlor.

Cleardocs cannot give you any advice about this.The summary here is information only. It is provided by Maddocks.

How much is the Settlor contributing to settle the trust (that is, what is the Settled Sum)?

$10.00 is the standard amount for a settled sum.

There is no rule as to what the level of the settled sum should be.

The Trust will be properly constituted if an amount of money is settled on the Trust. However the Trust should not be settled for less than $10.00 in case the amount is regarded as being trifling.

The settled sum is contributed courtesy of the generosity of the settlor. Therefore, neither the trustee nor any named beneficiaries should be asked to reimburse the settlor for this amount.

Cleardocs can not give you any advice about this. The summary here is information only. It is provided by Maddocks.

Is an appointor to be named?

The Appointor's role is to replace the Trustee if needs be. Although you have a choice as to whether an appointor will be appointed to the Discretionary Trust, you should consider the benefit of having an appointor to cater for situations such as the death or insolvency of a trustee.

The appointor may be the settlor, an existing trustee, a named beneficiary or any other third party.

Cleardocs can not give you any advice about this. The summary here is information only. It is provided by Maddocks.

How many trustees will there be?

You may have up to three people as trustee or else one company as trustee. Although the law allows other structures, any other structure is likely to complicate administration of the trust.

If you would like any other combination to be the trustees, then you should consider using a company as the trustee. That way you can have the company controlled (through directorships and shareholdings) by the people you wish to be the trustees. This works more efficiently because the rules about how the company is to make decisions are set out in the company's constitution and in the law.

You can set up the company through Cleardocs — and register the company with ASIC electronically. The whole process takes only 20 minutes or so — and you get the ACN instantly. A company through Cleardocs costs $563.50 (including ASIC fees of $426 and GST)

If you are creating a discretionary trust with one person as trustee and one person as the named beneficiary, then you should ensure that the trustee is NOT also named as the sole named beneficiary. If the trustee and the sole named beneficiary is the same person, then the trust may not be valid. Therefore, you should consider an alternate structure, perhaps using a company as the trustee.

Do you want to exclude the trustee from being a beneficiary of the trust?

There is a Stamp Duty issue you need to consider here.

The issue will arise only if the Trust ever changes trustees at a time when the Trust has certain types of assets (for example real estate) that are primarily situated in any of New South Wales or the ACT.

If the Trust does change trustees and at that time the Deed does not exclude the trustee from being a beneficiary, then stamp duty will be payable on the transfer of those assets to the new trustee. (You don't have to worry about assets anywhere else — the law is different.) So if you answer:

• "Yes" to this question, then the Trust Deed will exclude the trustee from being a beneficiary.
• "No" to this question, then the Trust Deed will not exclude the trustee from being a beneficiary. However, if there is trust property in New South Wales or the ACT, this may result in a stamp duty liability on the change of trustee in New South Wales or the ACT.

How many beneficiaries will the Trust have when it starts?

The named beneficiaries do not obtain an interest in the assets of the Discretionary Trust nor do they obtain any right to distributions from the Discretionary Trust. The distribution of income or capital by the trustee may be made to any member of the defined set of beneficiaries which includes the named beneficiaries as well as those people set out in the Schedule - which contains a list of other eligible beneficiaries defined by their relationship to the named beneficiaries.

Including children as beneficiaries

The Trust Deed's schedule will include a long and all-encompassing list of 'classes of eligible beneficiaries' which includes any children or grandchildren of the named beneficiaries here. That schedule also includes siblings, parents, charities and many other classes of beneficiaries that 'belong' to the named beneficiary here.

Cleardocs cannot give you any advice about this. The summary here is information only. It is provided by Maddocks.

Can an Estate be named as a beneficiary?

No. An estate does not exist until a person dies. Therefore the estate can not be a beneficiary as it is not a person.

It should also be noted that a beneficiary of a discretionary trust does not have a legal interest in the discretionary trust. This is because, until the trustee resolves to make a distribution in favour of a particular beneficiary, that beneficiary only has a 'mere expectancy' to receive a distribution. A 'mere expectancy' is not a legal interest which can be assigned to another.

Cleardocs can not give you any advice about this. The summary here is information only. It is provided by Maddocks.

If the trustee and the sole named beneficiary is the same person, then the trust may not be valid.

The trustee of a trust is capable of also being a beneficiary of that trust in his or her capacity as trustee.

However, the trustee cannot be the only beneficiary of trust in which they act as the trustee. This is because a trust is a relationship whereby the a person (the trustee) holds legal ownership of certain assets (the trust fund) for the benefit of another person (the beneficiary).

If the trustee were the sole beneficiary of the trust, both the legal ownership of the trust assets and the right to benefit from those assets would reside in the one person, i.e. the trustee. There would therefore be no trust in existence.

Cleardocs can not give you any advice about this. The summary here is information only. It is provided by Maddocks.