FAMILY BUSINESS TRUSTS AND NOMINATING A CHILD AS BENEFICIARY OF A CERTAIN ASSET

There are many cases where small-to-medium-sized businesses are conducted via a discretionary trust set up by Mum and Dad. There is a family company trustee of the trust. The business assets of the Trust often represent distinct businesses in themselves, for example, retail stores or restaurants, or properties.

Often times, as part of their succession planning and estate planning Mum and Dad decide that they want to leave a business of the trust to each of a few of the children.

We issue a word of warning that, it Mum and Dad try to do this by varying the terms of the discretionary trust deed to have the trustee company hold each of the assets for each of the children, they are in dangerous Stamp Duty and Capital Gains tax territory.

Resettling the terms of the trust so that it leads to a particular asset being subject to a separate charter of rights and obligations so as to give rise to the asset being settled on terms of a different trust (for a particular child, rather than being available to all) is viewed as a disposal, such that State stamp duty is payable on the value of each asset designated for each child, not to mention Capital Gains Tax payable to the ATO.

Jim Wilson- Principal