• A trust is a legal relationship in which a person or organisation known as the ‘trustee’ takes legal ownership of property or other assets known as ‘trust property’ for the benefit of another person, persons or an organisation known as the ‘beneficiary’ or ‘beneficiaries.’
• The person establishing the trust is known as the ‘settlor.’ Once the settlor transfers the property to the trustee the settlor no longer owns the assets.
• For discretionary trusts the settlor should be a neutral third party such as a close family friend who is not related to you or any of the beneficiaries.

o   It is important that the settlor is someone who will never benefit from the trust as this can cause problems with taxation.

o   If the settler is an accountant or lawyer who has been paid for their services in establishing the trust this may affect the validity of the trust as a whole as the settlement sum must be a voluntary gift to the trust.

• The settlement sum or property transferred to establish the trust is usually a nominal amount but should be at least $10.00.

o   You should talk to an experience trusts lawyer or financial advisor about major assets you wish to transfer to the trust and the best way to achieve this before establishing the trust as there may be capital gains tax and stamp duty consequences. Our free Find a Lawyer directory may help put you in touch with the assistance you need.

• The property held on trust is owned in law by the trustee and in equity by the beneficiary. The trustee assumes responsibility to manage the assets for the sole benefit of the beneficiaries.

·         There are many different types of trust and the type of trust you choose will generally depend on the purpose for which it is being set up.

·         Some of the most common trust structures are:

o   a trading trust:

§   established for the carrying on of a business for the benefit of others;

§  a trustee such as a company may carry on a business for the benefit of various family members; and

§  business profits are distributed annually to those family beneficiaries;

o   a unit trust:

§  an investment trust structure;

§  a company purchases property and transfers the legal title for that property to the trustee;

§  the beneficial interest is then split into 'units' for investors to purchase; and

§  investors are entitled to shares in the trust income and any returns from the capital investment;

o   a testamentary trust:

§  established by a will to manage the assets and income of an estate for the beneficiaries of that estate after a person dies;

o   an inter-vivos trust:

§  established during a person’s lifetime in order to manage assets or investments and to provide for beneficiaries;

§  a trust deed will usually govern inter-vivos trusts; and

§  in family trusts the trustee is usually a family member and the trust is usually designed for income splitting and tax minimisation purposes;

o   a minor's trust:

§  established for the protection and management of assets for the benefit of a child until they reach a certain age;

o   a disability trust:

§  established to support and finance family members and guardians who are responsible for providing for a child with a disability; and

o   a charitable trust:

§  established for the benefit of an ongoing furtherance of a charitable cause.