Why Business Owners Need A Family Trust
As a self-employed person, managing your finances and protecting your assets is crucial. One effective way to achieve this is by establishing a family trust. A family trust serves as a mechanism for holding assets, ensuring that your property is managed for the benefit of beneficiaries (which usually includes you).
Here’s why a family trust is essential for self-employed individuals, particularly those facing risks from creditors or operating in industries where some risks are not covered by insurance i.e. WorkSafe fines.
Understanding Family Trusts
A family trust involves placing your assets under the control of trustees—typically yourself and an independent person—who manage these assets for the benefit of the beneficiaries, which often includes you. While the trust itself does not have a legal identity separate from the trustees, it provides a structured way to manage and protect the assets. If for instance, you became bankrupt, the Trust assets would not be called in by the Official Assignee as the Trust owns the assets, not you. This structure helps shield your assets from personal creditors.
Establishing a trust must be for valid commercial purposes, such as asset protection or restructuring; it cannot be solely for tax efficiency.
Tax Benefits of a Family Trust
Trusts are currently taxed at 39%. However, one of the advantages of a family trust is the ability to distribute the trust fund to beneficiaries who may be in lower tax brackets.
In recent years the compliance requirements for a Trust have increased, however, they still provide asset protection. If you’re unsure if a Trust is right for you, feel free to complete a FREE eligibility form to see if a Trust is suitable for your needs.
