Four Types Of Trust In Australia

Dominique Grubisa
Dominique Grubisa

Published 10:19 pm 26 Nov 2020

Facebook Twitter Whatsapp Linkedin

Once used predominantly by the very wealthy, trusts are now being put to use by large numbers of regular Australian families. The reasons are simple. As well as delivering potential tax advantages, these clever legal arrangements can help protect family assets for many years to come. DGI Founder and CEO Dominique Grubisa explains more.

So, what is a trust and how could one work for you?

Types of trusts?

  1. Discretionary Trusts
  2. Bare Trusts
  3. Charitable Trusts
  4. Vestey Trusts

In essence, a trust is a legal vehicle through which a third party or ‘trustee’ holds and directs assets on behalf of beneficiaries. The key elements in a trust arrangement are the settlor who creates the trust, the trustee who administers it, the fund where income is received, and the beneficiaries who benefit from the trust. One of the key features of many trusts is that they separate ownership of assets from control, which can have both tax and asset-protection implications.

→ EMERGENCY Webinar Briefing on How To Safeguard Your Wealth While You Profit Safely

There is a wide range of different trusts that can be established depending on your individual circumstances, including:

Discretionary Trusts

Discretionary trusts are trusts where the trustee is able to exercise discretion in the way he or she distributes the assets held by the trust. The trustee can distribute assets to some beneficiaries and not to others, and carefully time the release of assets to achieve maximum benefit. This can be useful for both tax efficiency and asset protection purposes. For example, discretionary trusts are often used as family trusts. In a case where one family member is in a high tax bracket and another, like a spouse is in a lower bracket, the trustee might help reduce the tax paid by the family by paying all the proceeds from the trust to the spouse. Meanwhile, because a discretionary trust separates asset ownership from control, it’s difficult for creditors to access funds held in trust should one of the beneficiaries go bankrupt or experience other legal problems.

Discretionary trusts can be used to distribute the profits from a family business and, when created in association with a will, become testamentary discretionary trusts for the management of deceased estates.

Bare Trusts

With a bare trust, the trustee has no discretion and simply holds the assets on behalf of the beneficiary. He or she releases the assets when directed by the beneficiary. This is the simplest form of trust and offers little in the way of asset protection. However, such trusts are useful in a range of circumstances. They are typically used by people wanting to buy property via their self-managed super funds. In instances where the super fund holder needs a loan to acquire the property, the trust is the holder of the property until the loan is repaid. Another use of a bare trust is buying a property where you may not want the vendor to know your identity, such as buying from a neighbour who has vowed never to sell to you.

Charitable Trusts

A charitable trust is a trust established specifically for charitable purposes. Such trusts can be used to maximise the amount of funds beneficiaries receive while reducing the amount of tax they pay.

Vestey Trusts

While many trusts offer a degree of asset protection by separating ownership of assets from control, they are not infallible. The concept of a Vestey trust takes asset protection to the next level. This involves establishing a special external trust to give you an additional layer of protection and can stop other creditors stripping away assets.

So, don’t write off trusts as something only used by the super-wealthy. Whether your goal is asset protection, tax effectiveness or related to self-managed super, there’s a trust to suit you.

To learn more about asset protection, register now for our emergency webinar briefing where you’ll learn how to safeguard your wealth while you profit safely.

Frequently Asked Questions

What type of trust do I need?

The type of trust that you’ll need will vary depending on your circumstances and your intentions. Certain trusts can help to minimize taxes and others may be useful when it comes to ownership of your involving multiple parties.

What are the different types of trust?

There are many different types of trusts, including Family Trusts, Discretionary Trusts, Bare Trusts, Charitable Trusts, Blind Trusts, Testamentary Trusts and Unit Trusts.. Each trust has a unique function and may provide particular benefits depending on your situation.

Is a trust a legal entity?

In Australia, a trust is not considered a legal entity, but rather, a trust is a relationship in which the trustee is legally responsible for the assets and debts contained within the trust.

What is a trust fund?

A trust fund is a financial vehicle that transfers ownership of assets to another person (a trustee) who can then distribute the assets to beneficiaries in accordance with the terms of the trust or, if appropriate, at their discretion.

What is the purpose of a trust fund?

A trust fund may serve several purposes, including ensuring that loved ones get access to assets, structuring as to protect assets from creditors, and lowering one’s income for tax minimisation purposes.

MWC Webinar Banner

Good Debt Vs Bad Debt With Dominique Grubisa - DG Institute

Lawyer, Asset Protection Specialist and Property Educator

Dominique Grubisa is a practicing lawyer with over 25 years experience. She is a property investor and developer, an entrepreneur with businesses in Australia and Southeast Asia, a speaker, educator, writer and published author.

This column has been written for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such.

About DG Institute

Founded in 2009, DG Institute strives to empower everyday Australians to grow and protect their wealth. Our goal is to provide direction, motivation and inspiration to our clients and help them perform at their very best. We do that through our professional services, in addition to teaching them how to grow their wealth through property and business education.

This column has been written for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such.

Our Happy Clients

  • Lisa Mitchell

    "My name’s Lisa Mitchell. I live in Chatswood in Sydney. Since joining the Elite Mentoring Program. I’ve done two deals made around $240,000. And probably when I add the extra rental that’s coming, it’s another $70,000. I could not be happier with that result. And I’m amazed by it, to be honest, I’m absolutely amazed. […]"

    Lisa Mitchell, Property Uplift Elite Mentoring Graduate

  • Jennine Kimbal

    "Janine Kimball from Newcastle since joining DG Institute we have two projects currently in progress with a gross realization value of about 10 and a half million dollars expected profit from those is going to be probably around $1.8 million when they complete the reason we joined DG Institute and the Elite Mentoring Program, was […]"

    Jennine Kimbal, Property Uplift Elite Mentoring Graduate

  • Michael Kuligowski

    "Hi, my name’s Michael, and I’m from New South Wales. Since joining the Elite Mentoring, we’ve been able to secure three properties. Well, under market value, both in inner Sydney, New South Wales, also regional new South Wales and one in Victoria by, undertaking, this program, we’ve definitely benefited, and we can see that we’re […]"

    Michael Kuligowski, Elite Mentoring Graduate (Property Uplift & Real Estate Rescue)

  • Sharon Harvey

    "Hi, I’m Sharon Harvey. I’m from South Australia. I joined the Elite Program because I was looking for something more in property and I was looking for more education and somebody who would inspire me and Dominique was that person. I listened to her talk and realize that there was a great synergy between us. […]"

    Sharon Harvey, Property Uplift Elite Mentoring Graduate

You May Also like to Read

Climate Change to Cost $25 billion in Damages to Australian Households

Is your suburb at risk of facing climate-related damages in the future?  Over the past twelve months, Australia’s...

What Are Asset Classes?

Knowing what the various asset classes are is a prerequisite for any budding investor or business owners. So, let’s take a...

Caveats On Property Explained

Often considered the “red flag” of real estate, here is everything you need to know about Caveats on properties.  A...

Australia’s About to Break This COVID-19 Record

Australia’s lauded COVID-19 strategy is wearing thin.  Australia has been the envy of the world for most of the...

Will Australia Go Into Another Recession?

With more than half of the country now in lockdown, the threat of another recession looms over Australia.  Prior to...

Sydney Lockdowns Extended: Here’s the Support Available

Sydney’s Lockdowns have been extended for a further 4 weeks - and that might be just the beginning. Here’s the support...