Gifting assets to your Family Trust, not only protects your family assets but is great for tax planning as well.

Many of us establish a family trust for asset protection. As the term suggests it’s a Trust to hold the family assets for the family.

Having now established your Trust, many ask us how do I get money and assets into the Trust.

Family trusts protect assets

Fundamentals of a family trust

A Family Trust has a couple of fundamental elements that your should be aware of, and in simple terms these being:

  1. Trust Deed – the rule book
  2. Settlor – establishes the family trust.
  3. Trustee – runs the Trust normally you via a corporate trustee.
  4. Appointor – appoints the Trustee.
  5. Beneficiary – family who benefit from the Trust.

How do I get money into my family trust ?

You can place money in your family trust in two ways, as detailed :

1.Gifting assets from your funds to the trust. ie money or assets transferred in

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.

Gifting will mean that once the asset is gifted it becomes the asset of the Trust . The asset is no longer forms part of your personal estate. Often used to segregate assets to protect family wealth from new arrivals , mariage seperation etc

Take care to document this well and to be aware of any capital gains tax implications for the gifter. There is normally no rollover provisions for capital gains tax gifting transfers. There is a variety of reasons why you might gift an asset into your trust and we would be happy to help you work through a strategy.

Loaning money to your Trust!

A loan to your Trust from you allows you to request from the Trustee that you can recall the monies. To request your loan account repaid will be subject to trust the ability to pay and several other factors. Though a loan agreement is not necessary, many people still decide to draw up such an agreement for certainty and estate planning. The Trustee has an obligation to repay the loan if requested. If there is no loan agreement has been entered into between you and the Trust then the loan should be recorded by the Trustee at a minute and recorded in the Trusts balance sheet.

Do you charge the Trust interest on your loan? Sometimes there is an agreed rate but it will depend on your circumstances.

Gift 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 Trusts capital or corpus. Assets in a Trust mean that over time creditors, angry family members and newly wedded children cannot make a claim on these assets. The Assets are now owned by the Trust and not yourself which is great for the safe custody of those assets.

Imporant points to note before transferring assets or gifting to the Trust!

  1. Check any land tax rules as often there will be a land tax surcharge for assets in a Trust
  2. Check capital gains tax
  3. Get valuations
  4. Understand that the assets becomes the trusts.

A mistake many do is to gift assets to the Trust but forget to change registration and other ownership details such as title particulars etc.

The control in a family trust 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. This means that the Trust continues to the next generation detailed in the Trust Deed until trust vesting day normally 80 years after establishment.

We recommend that a corporate Trustee be established for a number of reasons. If you die , and you hold a role as a personal trustee the bank will freeze your bank accounts and this inadvertently may include the one noted as you as a personal trustee of the Trust. Tread carefully to fully document major Trust decisions including gifting.

Assets are owned by the Trust, by gifting can in some circumstances for allowing for social security planning.
Every person’s circumstances are different. We have provided you with a very simplified summary of the operation of the trust and your money. We suggest that you seek professional advice, and we are happy to assist you if you need help in this area.

For more help contact Geoff on 95979966 or contact us on this link

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