Trusts come in different shapes and sizes

There is no one-size-fits-all trust. Choosing the right trust depends on numerous factors.
Here are some of the most common types of trust structures for business owners,
families, and individuals.

Discretionary Family Trust

Family trusts are established to manage, protect, and pass on family assets including shares, personal property,
and the family’s business from one generation to another.

Income and capital gains can be distributed at the trustee’s discretion to any family member they see fit. This
includes family members at lower marginal tax rates as a means for reducing tax obligations. They can also
exclude income and capital payments to troubled family members.

Family members might include your own family lineage along with your partner’s parents, children, grandparents,
brothers, sisters, nephews, nieces, and their spouses.

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Testamentary Trust

A testamentary trust is established according to instructions in a will. So it does not exist until the person making
those provisions passes away.

Rather than the deceased person’s assets going directly to beneficiaries, the assets are held in trust on behalf of
those beneficiaries. Funds are then distributed according to the deceased’s rules and conditions.

A testamentary trust can protect the assets a beneficiary may receive in the event of bankruptcy, business lawsuit,
or relationship breakdown. Unlike discretionary family trusts, minors receive the adult tax-free threshold of
$18,200, which means you can tax-effectively distribute trust income and capital gains among children,
increasing the net income distribution to the family.

Special Disability Trust

Special disability trusts can be established to help family members and caregivers provide for the future care and
accommodation needs of disabled or vulnerable family members. They can also attract social security means test
concessions for the beneficiary and those family members establishing the Special Disability Trust.

Bloodline Trust

Bloodline trusts are designed to keep money and assets in the family. Protecting the inheritance of your children
and their descendants – children and grandchildren – from seizure following future divorces or separations,
creditor claims, and bankruptcy claims. They can also be used to shield future generations from unnecessary
capital gains taxes and stamp duty issues.

Spendthrift Trust

A spendthrift trust is a property control trust that limits an irresponsible beneficiary’s access to trust capital and
income. This restriction protects trust property from a beneficiary who might squander the trust property and his or
her creditors if they have control of the asset.

Examples of spendthrift beneficiaries include family members who aren’t financially responsible, could be easily
deceived, could easily fall into debt with creditors, or have an addiction that could cause him or her to
squander the money.

Unit Trust

A unit trust is a specific type of trust that divides the beneficial ownership of the trust property into units. It differs
from a family (discretionary) trust in that trust property in the unit trust is held absolutely for the unit holder.
Therefore, it does not give the trustee the discretion to distribute income or capital among unit holders.
Distributions must be allocated in accordance to units held in trust.

Business Trust

There are numerous types of asset holding, licence, and service trusts that may be established for a business. But
business trusts are essentially used to manage and protect that business from loss due to lawsuits filed by
employees, clients, and creditors.

They’re also used to separate your personal from your business assets and to ensure family assets are out of
reach in the event your business is sued or files for bankruptcy. Your business assets are also protected in the
event you – personally – are sued.

Similar to family trusts, business profits can also be distributed tax effectively to reduce taxes and increase net
business profit. Business trusts can further access small business tax concessions. In other words, if you sell your
business, you could be exempt from capital gains tax.
This could save you tens – even hundreds of thousands – of dollars in taxes.

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