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Gifting
Family Trust

Gifting assets to a family trust

Gifting Assets to your Family Trust or transferring property to a trust protects your investments and assets by placing them in a Trust Environment!

Let’s explore why you would transfer a property into a Trust or just give money to your Trust!

There are many opportunities for this. For a start a Family Trust is 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.

Your Family Trust should be the hub of your investments allowing for flexibility and control of your family assets!

Having now established your Trust, you may now ask how do I get money into the Trust and what can i use it for?

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?

There are two main ways to add money into your trust :

  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.

In transferring your Asset to the Trust make sure you have ticked all the legal boxes. This will mean that the Trust Assets are secure and recognised as owned by the family trust. The Trustee should for all property and loan transfers document the transfer. Minutes should explain why and how the it is a gift to teh Trust. Assets that are transferred to your Trust these will then 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

Transferring the Asset or loan to the Trust as a gift achieves your estate planning needs . 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. When there is no loan agreement is in place , then the loan should be recorded by the Trustee by a minute to ensue there is some documentation. The accountant should record it on the Trusts balance sheet. As Trustee or the lender you can request 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

There will be Capital Gains implications and we can assist you here . Tread carefully and allow us to help you work through the implications of the potential transfer..

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. A Trust can offer protection over time. Your Trust protects your assets when things go wrong. These include Creditors, angry family members and newly wedded children. The Trust protects your Assets as these people are now not able to make a claim on these assets as they are now owned by the Trust.

A Family Trust, mechanism allows the control to be 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.

There are Social Security opportunities . Gifting can in some circumstances for social security planning but seek advice!

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