Unit & Discretionary Trusts

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Unit & Discretionary Trusts

 
 
 

INTRODUCTION

Setting up a new company. It's a busy and exhausting time. During the startup process it's never a bad idea to seek advice, both legal and financial, about ways to maximise the company's potential returns. Think of it as doing your due diligence. One option that is worth exploring is creating a discretionary trust.

 

WHAT DOES IT COVER?

A Trust is an arrangement where someone legally owns property for someone's else's benefit. The arrangement involves a trustee (personal or corporate) and one or more beneficiaries. The person or entity (known as the 'trustee') is responsible for the trust, including the handling and distribution of funds to eligible parties (known as 'beneficiaries').

In a Discretionary Trust, the trustee has discretion to choose how and in what proportions the trust property is distributed between the beneficiaries. It is also common practice in Discretionary Trusts to hold shares in proprietary companies within, as this allows for tax minimisation.

Alternatively, in a Unit Trust, the trustee distributes funds to beneficiaries in proportion to their share of units in the trust. Here, is it not unusual for shares in a proprietary company to be held in a Unit Trust, but doing so does deliver a number of taxation benefits.

 

WHY IS THIS IMPORTANT?

A number of tax benefits can be received with the use of a  Trust. If you are setting up a new company, or looking to grow your investment portfolio, you should certainly consider obtaining legal and financial advice about creating a trust vehicle.


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