What is a trust?

A trust is a relationship by which a party (the trustee) holds property for the benefit of other people (the beneficiaries) on certain terms and conditions. The trustee has the legal interest in trust property and the beneficiaries have the equitable interest.

Trusts come in various forms with the most common being:

Bare trusts - the trustee generally has no active duties to perform and the beneficiaries can call for a transfer of the trust property to them at any time.

Unit trusts - the trustee holds property on behalf of the unit holders who own units in the trust. Unit trusts can be fixed for the purposes of the nsw land management act and have access to the land tax threshold.

Discretionary trusts - commonly known as family trusts, give the trustee a discretion to decide which of a number of beneficiaries is to receive the income of the trust each year as well as a discretion to decide which of the beneficiaries can receive capital from the trust either during the trust's existence or when it ends. Discretionary trusts are good business operating entities and, if structured correctly good asset protection vehicles.

Testamentary trusts - are trusts created by someones will. Testamentary trusts are excellent estate planning vehicles with tax advantages and, if structured correctly, good asset protection.

Self managed superannuation funds - are a form of trust by which the trustee holds the assets of the fund on behalf of the members of the fund. The members cannot access the funds until certain conditions of retirement are met.