Discretionary (Family) Trust Deed

What is a discretionary trust?

In a discretionary trust (or family trust) the beneficiaries do not have a fixed entitlement or interest in the trust funds. The trustee has the discretion to determine which of the beneficiaries are to receive the capital and income of the trust and how much each beneficiary is to receive. The trustee does not have a complete discretion. The trustee can only distribute to beneficiaries within a nominated class as set out in the terms of the trust deed.

What is the trust deed?

The trust deed defines the relationship between the trustee and the beneficiaries. The parties to the trust deed are the settlor and the trustee. The trust deed specifically sets out the duties and powers of investment of the trustee, the beneficiaries, and other important stuff.

Can I explicitly exclude foreign persons?

If someone is considering setting up a trust to acquire land in one of the above States, and do not want any foreigners to be beneficiaries, they can request a deed from ABNAustralia.com.au that includes a provision that explicitly excludes foreign persons as primary or secondary beneficiaries. When completing the 'Beneficiaries' section of our online order form, simply select the option to exclude foreign persons.

Including a broad provision in this manner provides certainty that your family trust will not be deemed a foreign person in any state, regardless of the differing definitions as defined within each state’s legislation.

We wrote about foreign surcharges on our blog here.

What is the role of the settlor?

The settlor's function is to give the assets to the trustee to hold for the benefit of the trust's beneficiaries on the terms and conditions set out in the trust deed. The settlor executes the trust deed and then, generally, has no further involvement in the trust.

The settlor of a Discretionary Trust must be an independent person. That person, or his or her spouse or children, cannot be beneficiaries of the trust and should not be trustees. A settlor will often be a family friend or a solicitor or an accountant who will not be a beneficiary or a trustee.