Making it last – structures for long term structuring

There is the old saying that wealth does not last 3 generations, that is, you spend your life building up your wealth, leave it to your kids and it’s gone before they can leave it to their own. Divorces, creditors and a myriad of other trials and tribulations of life can all lead to a dissipation of what was once a substantial asset pool.

However, if you get good advice and put the correct structures in place, you can beat the odds and leave a lasting legacy. Certus Legal Group can offer you advice and establish legal structures such as Testamentary Discretionary Trusts and Lineal Descendant Trusts that can help ensure your wealth only goes to those you intended it to.

Discretionary Trusts

Discretionary trusts are a legal structure which give the person administering the trust (‘the trustee’) the discretion to pay the beneficiaries as much of the trust income as the trustee considers appropriate. This can be compared to a fixed trust in which the beneficiaries’ entitlements under the trust are predetermined.

In a trust, the assets do not belong to individual beneficiaries, making a trust great for asset protection. It is especially useful where beneficiaries are at an added risk, for example, if they are:

· a professional;

· in a business partnership; or

· have bankruptcy, debt or other liability issues.

The trust itself does not pay tax, however any beneficiary who receives income from a trust will pay tax on that income. This allows for efficient tax planning which may differ from year to year to best preserve and grow your wealth.

Testamentary Discretionary Trusts (TDT)

A TDT is a discretionary trust established as part of a will upon your death. A TDT can assist in maintaining the assets (or the capital value they represent) an individual has accumulated, while still allowing the family members to benefit from the income generated by those assets.

Lineal Descendant Trusts (LDT)

A LDT is a special type of discretionary trust which only allows distribution of the assets or capital of the trust to your direct descendants. The trust deed may allow the distribution of income from the trust to spouses of your descendants if you so desire. However, if you wish to restrict the distribution of assets and capital in some way, this can be done through a properly worded trust deed and may be helpful in avoiding Family Court proceedings down the track.

It is vital that all structures are properly drafted and established, and their operation complies with all the legislative requirements. If you have any questions or are considering protecting your wealth, please contact Certus Legal Group for advice.