Is a Family Trust right for me?

Published by Vanessa Crosby on August 24, 2010

 Many people you know may have a family trust but is a trust right for you? 

Advantages –

Creditor protection

  1. Protection against relationship property claims
  2. Protection of property from spendthrift beneficiaries
  3. Protection of children with special needs
  4. Protection of assets for future generations from potential tax law changes
  5. Possible protection of eligibility for income asset tested benefits
  6. Reducing or preventing family protection claims
  7. Possible tax savings on beneficiaries income

Disadvantages –

Loss of ownership of assets

  1. Additional administration
  2. Cost of formation of the trust and transfer of assets
  3. Future law changes

In some cases an immediate financial benefit can be achieved by establishing a family trust.  More often than not a family trust is formed to reduce the impact of changes which may or may not occur such as claims from business or creditors, the need to apply for asset tested benefits such as residential care subsidies or relationship break-downs.  In these cases a trust can be compared with insurance against sickness, when an insurance premium is paid but no benefits arise if the insured does not get sick.  For a family trust the initial set up costs and ongoing annual costs can be regarded as a sort of insurance premium.  You may receive a benefit from it although that cannot always be guaranteed. 

In deciding whether you should establish a family trust you need to carefully weigh the advantages against the disadvantages.  Your lawyer can assist you with this process.

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