Gifting Assets to your Family Trust protects your investments and assets by placing them in a Trust Environment

It is also great for tax planning. Many of us establish a Family Trust for asset protection and to ensure our assets are correctly passed on to the next generation. Having now established your trust, you may now ask how do I get money into the Trust?

Fundamentals of a family trust

Let’s explore the basics of a family trust first. The Trust has a couple of fundamental elements that you should be aware of, but in simple terms these are:

• Trust Deed – the rule book of how you run your Trust
• Settlor – establishes the family’s trust.
• Trustee – runs the Trust on behalf of the beneficiaries
• Appointor – appoints the Trustee.
• Beneficiary – family who benefits from the Trust.

How do I get money into my family trust?

Putting money into your trust can be done in two ways:

1. Gifting assets from your funds to the trust.

2. A Loan from you to trust – repayable defined or non-defined

Either method works but gifting assets to your Trust is better for estate planning.

It must be done properly so that the Trust Assets are secure and recognised as owned by the family trust. This means any transfers should be well documented and explained that it is a gift. It will probably be allocated to the Corpus of the Trust

A Trust is a legal entity. However, some registries won’t recognise the Trust but require the Trustee to be the registered owner on behalf of the Trust.

Beware Gifting means not easy to get it back

There are 2 points here you should consider

Once the asset or money is gifted it forms part of the capital or corpus of the Trust. In simple terms your Trust now owns it and the only way to get it back is to either make a specific distribution as capital or vest (ie windup) the Trust. In most cases, upon vesting of the Trust the capital would be distributable to the default beneficiaries. To understand how it would work for your circumstances you should consult you’re Trust Deed

Point 2 – is the ability of the Trust to enter into a Gift and loan back arrangement. Be careful if you are considering this as again it needs a well-documented agreement and actual $$$ changing hands.

Loaning money to your Trust!

Loaning money to your Trust will allow you to request that you can recall the monies you have lent to the Trust . Repayments will depend upon the Trust the ability to pay and several other factors. Even though a loan agreement is not necessary, many people still decide to draw up an agreement for certainty and estate planning.

The Trustee has an obligation to repay the loan if requested. If no loan agreement, then maybe at a minimum the loan should be recorded by the Trustee by a minute. The accountant should record it on the Trusts balance sheet. Yes, interest can be charged but that again depends upon what you have agreed to with the Trust and you as the lender.

Gifting assets to the Trust

A Trust can help protect you and your family’s assets. Many families gift assets to the Trust. This means that you forego ownership and the asset forms part of the Trust’s capital or corpus. This means that over time creditors, angry family members and newly wedded children cannot make a claim on these assets as they are now owned by the Trust.

In most Family Trusts, the control is established by yourself as the Appointor. The appointor has the ability to fire and hire the Trustee. This means that you effectively control the Trust.

Upon your death, your executor acts on your behalf. The great thing is that the Trust continues to the next generation detailed in the Trust Deed. This will continue until the trust vesting day normally 80 years after establishment.

As the Assets are owned by the Trust, gifting can in some circumstances for social security planning.

Every person’s circumstances are different. Therefore what we have outlined above is a very simplified summary of the operation of the trust and your money. We suggest that you seek professional advice. We are happy to assist you if you need help in this area.

Reach out to Geoff if you wish to talk about your circumstances. Phone 95979966

When I die what happens to my business and my affairs? Will my business continue or just stop?

If you were running as a sole trader and you die, in most cases, your legal personal representative will step in . It is their role to manage your business. They can assess if the business needs to be wound up, sold or transferred to a beneficiary.

Your business asset forms part of the assets of the estate. Therefore legally executed will , can help give certainty to your wishes.

Many clients are unsure of the process of what happens once they die.

There are several matters that should be dealt . These need to be dealt with in a timely matter when it comes to a sole trader business.

What happens after I die? The process of winding up my affairs

The process that can take place after death include

• The business continuation is a going concern ! – The longer the business is left un-managed, the greater chance that the business value may disappear
• Your executor will take control of your business until its decided upon . It maybe be sold wound up or given to a beneficiary as part of the estate distribution
• Choose your executor wisely that can deal with your business affairs
• Until probate takes place, its best to ensure if a beneficiary is to inherit the business that, this takes place as soon as practical. If this cant take place then allow a beneficiary to act as a caretaker mode
• Reassure customers and suppliers of the situation., Ensure, where possible, that the business remains of value and assets are protected from going missing
• Chase down outstanding monies and secure the business assets from theft. Stop and people thinking well the business owner has died they won’t care!

The business forms part of the estate and impacts the final distribution to beneficiaries. Often upon the death of a sole trader, there may be outstanding debts to the ATO, suppliers and financiers. If there are insufficient assets upon realisation to pay the debts, the estate is placed in bankruptcy.

Sometimes a business who is a sole trader dies suddenly leaving lots of debt. If the estate is unable to pay, then the estate becomes bankrupt. Pleas talk to us if this maybe your situation for a person you are acting for after death.

For those who run their business in a Company or a Family Trust

If you choose to operate your business as a Company or a Trust, your legal representative should be appointed as the Director or Trustee in your place. In this case, the business would continue. The ownership if the shares were owned by you it may form part of your estate. This may include any loan account owing to or from the Company.

If your ownership of your business is held by your Trust then you will need to consult your Trust Deed and control will also be held by the appointor and or Trusteee. This is an interesting area of law and taxation and we suggest you consult us.

Careful planning required

We suggest careful planning of your affairs. Planning will ensure that when it comes to your business, your wishes and adhered to and that a plan in cases of death has been considered to assist the executor in managing the sale of the business. It is why for many reasons, Life Insurance is recommended. Insurance will ensure that insurance proceeds can cover some of these unexpected business expenses.

If you are an executor you need to act to preserve the business value and we can help here

As a final tip is to make sure all registrations such as GST, ABN, social media accounts and WorkCover have been cancelled. This will avoid recurring notices. We can assist you here!

We welcome you to contact us and discuss a plan so that we can guide you on how you would like to finalize your affairs after the man upstairs has called you for higher duties.

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Reach out if you need our help

Brighton (3186) accountants are here to help based in Ormond!

Gartly Advisory are Accountants based in Ormond, Melbourne. While we are not based in Brighton 3186, many of our clients are!

Accountants that help Brighton Small business

You need a professional Chartered Accountants group that will offer you a professional quality service to assist you and your business to grow. Our clients are based all around Melbourne and we have a great selection of clients based in Brighton. Also, we have clients located in the nearby Bayside suburbs.

Clients love our service because the team at Gartly Advisory ensures that we provide advice and knowledge that small business clients can act on!

Join us for a coffee to see what we can provide you

It’s true we are not based in Bay Street or in Brighton but we are not far away. Our clients love the easy parking and hot coffee. Gartly Advisory has a team of a number of professionals and the firm has been in operation almost 20 years helping many small businesses.

Geoff loves swimming and loves going down to Brighton Bathes for a quick dip in summer. Talk to us about your small business needs and see if we can help you on your business journey.

Are you taking a giant step to make a difference or falling into a black hole? The fear of failure has killed more dreams than all other fears combined.

The fear of failure is insidious because it’s mainly in your imagination.

It can also prevent you from trying new ideas, growing and trying something new. Fear guarantees failure.

Interestingly, young children have no concept of failure. They couldn’t care less if they failed to do something. They just try again. There are no negative thoughts or emotions involved. They just keep on going.

Having hesitations is essential, which leads to calculated risks. But, give it a go, and in most cases, success will outweigh failure most times.

Consider these facts:

The fear of failure doesn’t have to impact your life significantly.

1. Failure is temporary – unless you quit. Failure isn’t final unless you give up. Successful people experience failures too. But they ended up being successful precisely because they didn’t stop. So failure is just a temporary state that means nothing because it’s only temporary.
   
   
2. Failure will occur with everyone. You’ve failed thousands of times and managed to survive. Consider how many times you were unable to walk or to talk well. Babies have constant failure.
   
   
3. Successful people fail all of the time. It’s a massive part of how human beings learn. We realized that our approach didn’t work; we adjusted and tried again.
   
   
4. Failure allows you to learn. You can learn something from every single one of your failures. Failure makes you more knowledgeable and capable. The more you fail, the stronger you become.
   
   

Why it’s in your imagination

1. Others are far less concerned about your failure than you think. A few people might notice your disappointment, but they quickly turn their attention back to themselves and their own challenges.
   
   There’s nothing to worry about. Feel free to fail as much as necessary. Fail enough, and you’ll quickly see that no one relevant cares.
   
   
2. Focus on how great it will be when you succeed. Don’t look at possible failure; consider possible success. Make yourself feel excited and optimistic about taking action.
   
   With high enough expectations, you’ll do just about anything without worrying about failure.
   
   

3. Redirect your thoughts. Put your attention on what you’re doing. Forget about the outcome. Stay focused on your actions or something positive. Thinking about failing will freeze you in your tracks. Take risks but put stop gap measures in so that failure is only a small chance in scheme of what you want to achieve.
   
   
4. Consider the cost of doing nothing. Taking action might be a little scary, but what will happen if you do nothing?
   
   
   • What will you feel about failing to take action?
   • What if you’re stuck in your current life for the nextfew years or more?
   • Maybe taking a risk is far more attractive than remaining where you are.
     We’ve all allowed the fear of failure to influence our decisions. We’ve allowed this fear to stop us from trying new things or taking risks. As a result, we all have more minor lives than we could because we’re too concerned with what others think.

Rejecting the fear of failure is one of the most incredible things you can do for your future! Your small business , your team and your family will be incredibly proud if you achieve your goals.

Plan to succeed!

 Bite off what’s going to give you joy. Go where no one has gone!

In business, we have all failed, but many also succeed.

Personally, I have failed at things that looked right. Ultimately I have used my failures to move forward and help myself and others. Failure to me is if I do the same dumb thing again and don’t learn from past mistakes

When it comes to inspiration you need to read what others have achieved and make your own list.

Not sure where to focus on in your business then check out our business value score and within 15 minutes receive your free score.

In 2022 to succeed, start an action plan. Focus on those things you are passionate about that will make a difference in your business. Many of us have a long list of formal and informal goals. Some of us don’t start then for fear of failure. Others find excuses, and others try to do everything at once. Don’t over commit but start by actioning small runs that you can get on the board.

You can start today. What are you going to do today that you’ve been afraid to try? What small step can you take that may make a difference? Sometimes 1 per cent changes can result in extraordinary outcomes. Conquer your fear of failure and just do it