Demystifying Trusts: Your Common Questions Answered for EOFY
As the financial year ends, many people ask me about managing trusts. They often wonder, "Can I do this? Can I do that? Can I make this investment or distribution? Can I use the Trust's capital to pay for a beneficiary's school or university fees?"
In this video, I explain how to clear up the confusion around these questions.
If you need help understanding a Trust, we have expert knowledge, so contact us.
VIDEO TRANSCRIPT
Ross Millen:
Hey, if you watched my most recent video, I was talking about the role of Appointors in a trust. And of course, the role of the
Trustee is also very important. I mean, they're the person that owns the assets on behalf of the trust, on behalf of the beneficiaries. Probably, the most common question I get asked about Trusts is, as trustee, can I do this? Can I do that? Can I make this investment? Can I make that distribution? Can I advance some of the capital to one of the beneficiaries so they can pay for their school fees or university education?
Now, the things to bear in mind are always read the trust deed, because every trust is different. Sometimes, Trustees might have certain powers in one trust deed and not in another. So we always have to read the trust deed to make sure that what you want to do isn't prohibited, or that there are certain things you must do as a trustee. Another thing is investment powers. There'll be investment powers in the trust deed, but also in the Trustee Act. So some types of risky or unusual investments may not be permitted.
The other thing is, who are the beneficiaries? Now, there was a recent case that decided the discretion given to a Trustee in a discretionary Trust, the Trustee has to consider the financial circumstances of all the various beneficiaries. So if you're in the habit of just giving the money, the income every year to one or two beneficiaries in the same shares, maybe that's risky. You need to think about who are the other beneficiaries, and do any of them need to receive a distribution of income?
And the final thing is if there's ever any issues about the Trust that you need guidance and you're not sure, we can't give a hundred percent guarantee. You can always go to the Supreme Court. Sure, it's a bit expensive, but the court will look at the circumstances and it will either tell you as Trustee that you can or you cannot do something. So if you're a Trustee or a director of a Trustee company, you must take your obligations very seriously. You need to get legal advice before doing anything out of the ordinary. So remember, I'm Ross Millen at Millens. We're here to help, help you administer your Trusts properly and efficiently. Thank you.
