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Equity & Trust Family Trust Assignment

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Added on  2020-04-01

Equity & Trust Family Trust Assignment

   Added on 2020-04-01

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Equity & Trust Family Trust Assignment_1
RESEARCH ASSIGNMENT2Contents1.Introduction..............................................................................................................................32.Why Family Trust?...................................................................................................................43.Advantages and Disadvantages................................................................................................54.Tax Features and benefit with family trust...............................................................................75.Asset protection features and benefit with family trust............................................................86.Current political developments affecting family trusts............................................................97.Things to consider while setting up family trusts...................................................................108.Case studies and lesson to be learnt.......................................................................................149.Conclusion and recommendation...........................................................................................1510.Bibliography.......................................................................................................................1710.1.Articles/ Books/ Reports.............................................................................................1710.2.Cases............................................................................................................................1710.3.Others..........................................................................................................................18
Equity & Trust Family Trust Assignment_2
RESEARCH ASSIGNMENT31.Introduction In Australia, there are different kinds of business structures which can be opted for pursuing the business and one of these is trust1. A trust can be defined as a fiduciary relationship present in which one is known as the settlor, who gives the other party, which is trustee, the right of holding the title to assets or property for benefitting a third party, which is known as a beneficiary. The debts of the company are the responsibility of the trustee. The trust form of business structure is established for providing lawful safeguards to the assets of the settlor, for making certain that these assets are distributed as per the wishes of settlors, to reduce paperwork and save time, and in particularly instances, for avoiding or reducing the estate taxes of inheritance2. The trust law was introduced back in 1970 by Malcolm EJ Morgan in the nation, who was an accountant profession wise3. The Australian trust law follows the English trust law and is amended through the commonwealth and State or Territory legislations. The rationale for choosing the trust depends upon the numerous advantages which are available, particularly in terms of tax benefits to the trust form of business structure4. However, this does not mean that the trusts do not have any disadvantages; some of these disadvantages would be discussed later on in this discussion. In the key characteristics of the trust is the requirement of drawing up a formal trust deed in which is stated, the manner in which a particular trust would beoperated, its operations, the need for trustee to fulfil the administrative tasks in formal manner 1 Jason Mattock, Doing Business in Australia for China: How to Invest in Australia for Chinese (Australia China Business Alliance, 2014)2 Greg Rostron, What is a discretionary trust and what are the benefits? (2017) <http://www.findlaw.com.au/articles/4606/what-is-a-discretionary-trust-and-what-are-the-ben.aspx >3Revolvy, Australian trust law (2017) <https://www.revolvy.com/main/index.php?s=Australian%20trust%20law>4 Michael Janda, Trusts and tax minimisation explained (28 July 2017) <http://www.abc.net.au/news/2017-07-28/trusts-and-tax-minimisation-explained/8752480 >
Equity & Trust Family Trust Assignment_3
RESEARCH ASSIGNMENT4and annually, and the expensive set-up of the trust. But the most important aspect, which pulls people towards trust form of business structure, is asset protection. The rules for the trusts depend upon the type of trust which one opts for. In Australia, there are a range of trusts which includes unit trusts, managed investment trusts, special disability trusts, charitable trusts, and family trusts5. In the following parts, a discussion has been carried on these different aspects of trusts, where the focus is laid on the family trusts. 2.Why Family Trust? A trust is deemed as a family trust when the trust’s trustee makes a “family trust election”. In order to make this election, the trust has to be controlled completely by a “family group”. The term family trust is used to refer to a discretionary trust which is set up for holding the assets of the family or for conducting the business of the family6. In general, these are established for tax purposes or for asset protection7. The Australian family trusts generally are established by the member of the family to benefit the members of a family group. They could be the subject of family trust election, through which different tax advantages are provided which is passed by the trust through the family control test and the trust income is distributed between the beneficiaries of the trust and these are the people within such family group8. These trusts also assist in protecting the assets of the family groups from the liabilities of one, or a higher number of family members, particularly in the events like insolvency or bankruptcy of 5Australian Taxation Office, Specific rules for some trusts (2017) <https://www.ato.gov.au/general/trusts/specific-rules-for-some-trusts/>6 Philip de Haan and Aimee Riley, Discretionary trusts and asset protection (20 February 2017) <http://www.wolterskluwercentral.com.au/tax/income-tax/discretionary-trusts-asset-protection/>7 Andrew Mirams, Why You Should Set Up A Family Trust (16 January 2017) <https://propertyupdate.com.au/why-you-should-set-up-a-family-trust/>8Clear Docs, Family Trusts explained and Family Trust Elections explained (2017) <https://www.cleardocs.com/extra-family-trust.html>
Equity & Trust Family Trust Assignment_4

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