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June 16, 2015
Discretionary Trust – Family Trust

By Kristy Lewis

Discretionary trusts (also known as family trusts) are often used as the structure to set up family investments or business activities. Generally a discretionary trust is established for:

Tax purposes

Asset protection, and

Income distribution to family members.

A discretionary trust is established by the execution of a deed of trust by the settlor and the trustee. The deed of trust will express the intention to create the trust and set out the rules for the management of the trust.

Defining

The settlor is the person who establishes the trust fund by payment of a nominal amount of money (called the settled sum) to the Trustee.

The trustee holds the trust property and acts on behalf of the beneficiaries of the trust and normally engages in investment or business activities to derive an income for the beneficiaries. During the term of the trust, the trustee may distribute income and capital between any of the beneficiaries.

A beneficiary however does not have any property rights in the trust property and cannot require the trustee to exercise the trustee’s discretion so as to distribute income or capital in favour of any particular beneficiary.

An appointor is usually nominated in the deed of trust and has the power to remove and replace the trustee. A guardian may also be nominated in the deed of trust and has the power to monitor any changes to the deed of trust and supervise certain activities of the trustee.

Regarding the Vesting Date

The trust will end on the vesting day, which day in Western Australia will be 80 years from the date of establishment of the trust. Although an earlier vesting date can be nominated by the trustee with the consent of the guardian.

Lewis Blyth & Hooper has extensive experience in preparing deeds to establish discretionary trusts. Please contact Kristy Lewis at to prepare such a deed or if you require any advice about trusts.