Succession Planning and Family Trusts – What to Know

Succession Planning and Family Trusts – What to Know

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Having a trust is not something that’s reserved for wealthy families. In fact, it can be a viable financial strategy for many people, and we’ll discuss what you need to know should you be interested in setting one up.

In simple terms, a trust is a legal entity that lets a trustee or a third party hold and direct assets in a fund on behalf of the beneficiary. It’s most commonly used as a tool to manage family assets, and it can protect your investments from taxes or pass them on to other members of your family.

The Nature of a Trust

Every family is unique, and trusts are always set up in accordance with a family’s particular needs. That said, trusts will have different terms, assets, and financial positions.

The trust is indeed part of your family’s wealth, but that doesn’t mean that it is part of your estate or is owned by you. Additionally, the assets will not be dealt with by your Will unless the trust terminates after your death and the assets are distributed to your estate. However, you can influence what happens to the trust and its assets in the event of your death.

To understand it better, you need proper succession planning, and here are some of the things you should know:

The Number of Trusts

It’s possible to have more than one trust connected to a family, especially for families that own various investments. Should you have more than one trust, you will be advised to keep non-at-risk assets separate from at-risk activities. This is to protect the trust should an investment fail.

Trust Activities

When it comes to succession planning, you need to identify what the trusts do. Identify active trusts from passive ones. You also need to consider whether or not there are any significant relationships with other parties involved in the trust, such as business suppliers, banks, and customers.

Trust Dependents

Another thing to determine is to whom the trust is dependent. For example, the father or the mother of the family is who the trust depends on to conduct its activities. In some cases, children will be involved as well, especially if the children actively participate in the family business through the trust. You should also look into third parties that carry out functions for the family business or the trust to know how their involvement will be affected should the main dependents die.

Trust Financial Position

As mentioned, one of the things that can determine the nature of the trust is its financial position. This is where you define certain details such as the net value, stability, income returns, and existing debts of the trust.

The Type of Trust

A family trust usually falls into these categories: discretionary trust, hybrid trust, and unit trust. There are other types as well, and each one is different. This is why in succession planning, you need to identify the specific type of trust that is suited for your family.

Conclusion

Succession planning for trusts can quickly become a complicated affair, especially when there are multiple assets and parties involved. As such, working with an adviser or a family law attorney to help you structure your trust for succession is important.

There are many aspects to consider with succession planning and it’s easy to get lost in the terms and other factors. With an adviser, you will be able to use appropriate strategies to achieve your trust objectives. Find an adviser with an excellent reputation and start working on your succession planning now.

One of Springfield Legal’s specialities is family law. If you need help with succession planning for your family’s future in Ipswich, QLD, contact us today!


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