I'm starting up a project that involves the development of land to build several townhouses which I intend to sell. There are multiple investors. Some of them are family and some are independent third parties. Should I use a discretionary or unit trust?
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Answer by LegalEagle™ staff, Melbourne 3000 VIC
- Unit trusts are often the most appropriate for property development projects where the parties are largely unrelated.
- Generally third party investors will need assurance that they are entitled to a set share of the investment profits. A discretionary trust will not meet their concerns.
- When mixing family interests with business investment you may prefer to use a family trust as one or more of the unit holders. This will provide you with the best of both structures.