Yes, for families with significant assets, multiple beneficiaries in different tax brackets, or succession planning needs. No, if wealth is modest, structures are simple, and the cost of compliance outweighs the benefits. This guide explains the legal advantages, drawbacks, and circumstances where a family trust makes sense in Australia.
A family trust—commonly referred to as a discretionary trust—is a legal relationship established by a trust deed under which a trustee holds assets on behalf of beneficiaries. The trustee has discretionary powers to determine how income and capital are distributed, subject to the terms of the trust deed and relevant state legislation.
In Australia, family trusts are frequently used for holding investment properties, shares, or business interests. They provide a mechanism for separating legal ownership from beneficial enjoyment, which has significant tax and asset protection implications.
Family trusts offer several well-recognised benefits under Australian law:
Courts have repeatedly affirmed that properly administered trusts can insulate family wealth from individual financial difficulties, making them a powerful legal instrument.
Despite these advantages, family trusts also present legal and practical drawbacks:
For families with relatively simple financial affairs, these disadvantages may outweigh the potential benefits. This is where finding a good family lawyer can help weigh costs against long-term advantages.
The cost of establishing a family trust typically ranges between $1,200 and $3,000, depending on the complexity of the deed and whether a corporate trustee is used. Ongoing costs include:
These costs should be weighed against the expected tax advantages, asset protection, and estate planning benefits.
Family trusts are beneficial when there is a need for structured asset protection, tax flexibility, and long-term succession planning. They are particularly useful when:
In short, family trusts are most beneficial when the legal and financial complexity of family wealth requires more protection and flexibility than direct ownership can provide.
When families consider establishing a trust, certain legal and financial questions recur.
They include flexible income distribution, stronger asset protection, streamlined succession planning, and business continuity. These advantages arise from the trust structure’s separation of legal and beneficial ownership.
Disadvantages include higher setup and compliance costs, restrictions on loss distribution, fiduciary responsibilities for trustees, and finite lifespan under Australian law.
They are worth it where significant assets, tax flexibility, and asset protection justify the compliance costs. They may not be suitable for families with modest wealth or limited need for structuring.
In Australia, establishment costs usually fall between $1,200 and $3,000, with annual compliance and legal advice adding to ongoing expenses.
The most common is the discretionary family trust. However, unit trusts and hybrid trusts may also be used depending on investment objectives and legal advice.
So, are family trusts worth it? For families with substantial assets, diverse beneficiaries, and intergenerational succession needs, the answer is often yes. The structure provides recognised legal advantages that protect wealth and optimise tax outcomes. However, for simpler estates, the administrative and financial burden may outweigh the benefits.
Before proceeding, professional advice is essential. At Legal Finda, families can access experienced property and estate lawyers who will provide tailored legal guidance on whether a family trust is the right structure for their circumstances.