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The legal information and commentary on this site is general only. Documents ordered
through Cleardocs affect the user‘s legal rights and liabilities. To assess their
suitability for the user, legal, accounting and financial advice must be obtained.
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Why can't a sole trustee be a sole beneficiary?The sole trustee cannot be the sole beneficiary because a trust is a legal relationship between a trustee and the beneficiary or beneficiaries. If a sole trustee were also the sole beneficiary, then this would be an agreement that a person had with themselves. The law says that no trust can exist in these circumstances. However, a trustee can be a beneficiary of the trust as long as there is at least one other beneficiary as well. Can an estate be named as a beneficiary?No. A person's estate does not exist until a person dies. So an estate cannot be named as a beneficiary as an estate is not a person. Can the trustee distribute to an estate if the beneficiary is deceased?Yes, if a beneficiary dies then the trustee may make a distribution to the beneficiary's estate - the Cleardocs discretionary trust deed has 2 requirements to allow for this:
Can the trustee distribute to an estate if the beneficiary is deceased?Can I name a charitable entity as a beneficiary? Yes, you can name a charitable entity as a beneficiary - but you must be specific (or else the trust might be void for uncertainty). You need to decide exactly who you wish to benefit and in what capacity they are acting (eg: company, trustee etc.) so you can specifically name the body that will benefit from the trust. For example, you can't just name 'the green movement' as the beneficiary. You need to name the entity precisely, for example: "World Wide Fund for Nature Australia". Can a trust be a beneficiary under the discretionary trust?No (but see next 2 questions). A trust cannot be a beneficiary under a discretionary trust because the law says a trust is not a separate legal person. For example, the 'John Smith Family Trust' cannot be named as a beneficiary of another trust. Even so, the trustee of a trust, in his, her or its capacity as trustee, is capable of being a beneficiary of a trust - see next question. Can a trustee be a beneficiary under a discretionary trust?Yes, a trustee can be a beneficiary of a trust - as long as you include the trustee's name and their capacity. For example:
'John Smith in his capacity as the trustee of the John Smith Family Trust'.
In this case, the trustee is effectively a beneficiary of the discretionary trust for the beneficiaries of the trustee's own trust. (The trust itself cannot be named as a beneficiary as it is not a legal entity.). Can a corporate trustee be a beneficiary?Yes a corporate trustee can be the beneficiary of the trust - as long as you include the trustee's name and their capacity. For example:
'ABC Pty Ltd in its capacity as the trustee of the ABC Family Trust'.
In this case, the trustee is effectively a beneficiary of the discretionary trust for the beneficiaries of the trustee's own trust. (The trust itself cannot be named as a beneficiary as it is not a legal entity.) Can I have 2 corporate trustees?Yes, you can appoint 2 companies to act jointly as trustees of a trust. However, experience shows that having more than one corporate trustee makes administering the trust much more complicated. Why can't a beneficiary transfer their "interest" under a discretionary trust to someone else?A beneficiary can't transfer their "interest" under a discretionary trust to someone else because until the trustee resolves to make a distribution in favour of that beneficiary, (or any beneficiary) that beneficiary's "interest" isn't a real "interest" or "right". Instead, it is what the law calls a "mere expectancy" - which can't be transferred. How will distributions to a beneficiary who resides overseas be taxed?A foreign resident who has paid tax on a distribution in Australia may also have to pay income tax again in their own country. However, Australia has "double taxation treaties" with many other countries to ensure that tax is effectively paid in only one of the countries. Maddocks can give you advice on double taxation treaties. Does the Settlor have to reside in Australia?No, the settlor does not need to reside in Australia. However, the settlor must be present when the trust deed is settled because he/she is responsible for the trust property becoming vested in the trustee. Does the settled sum have to be transferred into a bank account or can it be settled with cash?It is preferable to transfer the settled sum into a bank account. However, the settled sum does not have to be transferred into a bank account. As long as the settled sum is kept separate from the other property of the trustee, it is acceptable to either:
Does a Cleardocs trust give me asset protection?A trust can play an important role in an asset protection strategy. However, if you are concerned about asset protection, then you should seek legal advice. concerning your own circumstances. When should the trustee apply for an ABN for the trust?ABNs are not compulsory. However, there are many good reasons to have one - for example, ABNs help:
Also, you need an ABN to register for GST. Entities carrying on an enterprise in Australia . with a GST turnover of $75,000 must register for GST. More information can be found at www.abr.gov.au. Will the trust be entitled to an ABN?A trust must meet either one of the following 2 criteria to be eligible for an ABN: Criterion 1 The entity is any one of:
Criterion 2 The entity can answer 'Yes' to each of the following statements:
What do I do if my bank won't give me finance because "the trust deed doesn't allow it"?If a bank says it won't give you finance because the trust deed won't allow it, there are 3 steps you can take:
Most issues of this nature can be adequately and promptly addressed in this way. What do I do if the discretionary trust deed is lost?You can't simply replace a discretionary trust deed because to do so is likely to create a new trust - which has tax and stamp duty implications. So, if a discretionary trust deed has been lost, then you need to consider the following steps in consultation with a lawyer:
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