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How to Set Up a Trust Account in Australia

Trust accounts can represent a powerful financial tool to make your assets work for you. Commonly used by solicitors and real estate agents, as well as by individuals wanting to manage their assets for family or charitable purposes, trust accounts help thousands of Australians safeguard their financial goals each year. In this blog post, we'll explore the concept of trust accounts in Australia, including what they are, when they’re needed, and the benefits they offer. And, if you're still keen after all that, offer a simplified breakdown on how to set up your’e trust account in Australia.

Trust accounts

What is a Trust Account & When is it Needed?

A trust account is a financial account that is managed by a trustee on behalf of beneficiaries. The assets in the trust account can vary from cash to securities or real estate, which can be used for a variety of purposes, such as:

  • Protection from creditors or other claims

  • Management of assets for children, dependents, or other beneficiaries

  • Tax planning and minimising taxes on income or capital gains

  • Maintained privacy and confidentiality

  • Investment and estate planning

Benefits of a Trust Account

  • Financial efficiency: Trust accounts allows for the separation of ownership and control of assets. This allows for the protection and management of assets for others, tax planning, and maintained privacy. In addition, trust accounts also offer a range of investment opportunities, allowing for the management of assets such as stocks, bonds, and real estate.

  • Ease real estate transfers: Another benefit of a trust account is that it can be used for estate planning purposes. By placing assets in a trust, individuals can ensure their remaining assets will be managed and distributed according to their wishes. This can help to minimise the costs and complications of probate and can also provide for beneficiaries who may not be able to manage their own assets.

The responsibilities of the trustee:

Before setting up your trust account, it’s important to consider your choice of trustee. The clue is in the name, as it's crucial you select someone you trust. They play an influential role in ensuring your assets have the desired effects and your goals are met, so it’s worth spending some time to choose wisely. To help you make your choice, we take a quick look at exactly what this trustee will be required to do:

  • Manage and invest the assets: Once the trust account is set up and funded, the trustee is responsible for managing and investing the assets in the trust. This includes making decisions about how the assets will be used, such as buying or selling investments, managing property, and making distributions to beneficiaries. The trustee is also responsible for ensuring that the assets are managed in accordance with the terms of the trust deed and any laws or regulations that apply.
  • Prepare and file annual tax returns: Trusts are required to file annual tax returns with the Australian Taxation Office (ATO). The trustee is responsible for preparing and filing these returns, which must include information about the trust's income, capital gains, and distributions to beneficiaries. It is important to consult with a tax professional to ensure that the trust's tax affairs are in order.

How to Set up a Trust Account in Australia

Setting up a trust account in Australia is a relatively straightforward process, but it does require some planning and preparation. Here are the steps you need to take to set up a trust account in Australia:

1. Choose a trustee: With the above responsibilities in mind, many choose trusted individuals, companies, or trustee companies to be the trustee for their trust account. There's a lot to take on and some degree of financial literacy required, so be prepared to take some time in thinking through this choice.

2. Draft a trust deed: Once you’ve chosen a trustee, the next step is to draft a trust deed. A trust deed is a legal document that sets out the terms of the trust, including the purpose of the trust, the assets that will be held in the trust, and the beneficiaries of the trust. It is important to seek legal advice when drafting a trust deed, as the terms of the trust will have legal and tax implications.

3. Open the trust account: Once the trust deed is in place, the next step is to open the trust account. This can be done with most financial institutions, such as banks and credit unions. It is important to choose a financial institution that has experience with trust accounts and that offers the services that you need.

4. Fund the trust account: After the trust account has been opened, the next step is to fund the trust account. This can be done by transferring assets into the trust account or by depositing money into the account. It's important to keep accurate records of all transactions in the trust account, as these will be required for tax purposes.

5. Review and update the trust deed: Trusts are ongoing legal entities and it is important to review and update the trust deed periodically to ensure that it continues to meet the needs of the trust and its beneficiaries. This may include making changes to the terms of the trust, adding or removing beneficiaries, or changing the trustee.

To Wrap Up

Setting up a trust account in Australia can be a useful tool for managing assets and planning for the future. There's a range of benefits; from protection from creditors, investment opportunities and estate planning, as well as peace of mind that your wishes will be fulfilled. With that said, setting up a trust account does require planning, preparation and ongoing management. And, if you’re considering setting one up, it’s important to seek professional advice to ensure the right legal and tax requirements are met.

How Safewill can help

Safewill offers a convenient and cost-effective way to create your trust account. With easy-to-use templates and expert guidance to help you understand the process, we can help you create a trust account best suited to your needs. We’ll also provide legal advice, so you can ensure your trust account is set up correctly and in compliance with all relevant laws and regulations. Get started today, or chat through your options with one of our trusted experts on 1800 103 310 , or via live chat now.

Last updated 27th January 2023
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Hannah Comiskey