Discretionary Trusts

Discretionary trusts, or otherwise known as Family trusts, are well established and attractive business structures commonly used to provide the following benefits:

• Asset protection for trust assets.
• Ability to "stream" income distributions (different amounts to different beneficiaries each year).
• Access to the 50% Capital Gains Tax discount (after holding the asset for more than 12 months).

The main draw backs of utilising a discretionary trust are that:-

• Losses arising from trust activities are quarantined, within the trust and cannot be distributed to the beneficiaries.
• The cost of compliance and regulatory costs for operating a trust structure is generally higher than say operating a soletrader entity.

Although trusts do have excellent benefits as a business structure, a lot of which would require a lengthy discussion to appropriately cover, they do have some drawbacks that warrant some considering. If you wish to understand more about discretionary trusts, do contact us at [email protected].

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