Trust Deed Registration Overview

A trust set up in Australia is a legal arrangement where one party (the trustee) holds and manages assets on behalf of another party (the beneficiary). The trustee is responsible for managing the assets in accordance with the terms and conditions outlined in a legal document called a trust deed.  We will provide you with a trust deed and attend to stamping (if required).

Trusts are governed by state and federal laws, including the Trustee Act of each state and territory, as well as the Australian Taxation Office (ATO) guidelines. A trust is created when the settlor (the person who establishes the trust) transfers assets to the trustee, who then holds and manages those assets for the benefit of the beneficiary.

There are different types of trusts that can be set up, including discretionary trusts, unit trusts, and hybrid trusts. In a discretionary trust, the trustee has discretion to distribute the trust’s income and assets among the beneficiaries according to their needs and circumstances. In a unit trust, the beneficiaries hold units that represent a fixed percentage of the trust’s assets, and their entitlements are determined by the number of units they hold. A hybrid trust combines features of both discretionary and unit trusts.

If you require a trust, our team will carefully draft a trust deed that outlines the terms and conditions of the trust, including the powers and duties of the trustee, the rights and entitlements of the beneficiaries, and other relevant provisions that you may require. The trust deed must be executed in accordance with the applicable laws, and it is important to seek legal and financial advice where required.

What is the difference between discretionary trust and unit trust?

The main difference between a discretionary trust and a unit trust lies in how income and assets are distributed among beneficiaries and how beneficiaries’ entitlements are determined.

In a discretionary trust, also known as a family trust, the trustee has discretion to distribute the trust’s income and assets among the beneficiaries in a way that is determined by the trustee. The beneficiaries do not have a fixed entitlement or right to a specific share of the income or assets of the trust. The trustee has the flexibility to distribute income and assets based on the beneficiaries’ needs, circumstances, and the trust’s objectives as outlined in the trust deed. The trustee has full discretion and control over the trust’s assets and income, and beneficiaries do not have a fixed or enforceable entitlement.

On the other hand, in a unit trust, the beneficiaries hold units that represent a fixed percentage of the trust’s assets. The entitlements of the beneficiaries are determined by the number of units they hold. For example, if a beneficiary holds 30% of the units, they are entitled to 30% of the trust’s income and assets. Unit holders have a fixed and enforceable entitlement to the income and assets of the trust based on their unit holdings. Unit trusts are often used for commercial purposes, such as property investments or business ventures, where the distribution of income and assets is based on the fixed percentage of units held by each unit holder.

Another key difference is in the level of control and decision-making. In a discretionary trust, the trustee has sole discretion in distributing income and assets, while in a unit trust, the entitlements of beneficiaries are determined by the number of units held, and the trustee’s role is primarily limited to managing the trust’s assets.

Contact us today to schedule a consultation and take the first step towards setting up a trust.

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