Continuing the Blended Families Series, another way assets can be protected is through the use of trusts. Family discretionary trusts have become a popular vehicle to protect assets and stream family income to benefit from different tax margins of each of the family members.
If you are a part of a blended family, it is important to consider who falls within the class of general beneficiaries under the terms of the trust deed.
General beneficiaries in a family discretionary trust usually include spouses and children of the specified beneficiary of the trust fund.
It is important to pay attention to the defined terms in the deed to see whether former spouses, de-facto partners, stepchildren and adopted children fall within the meaning of general beneficiaries.
Depending on your wishes, you may wish to broaden or restrict the classes of people that would form part of the pool of general beneficiaries in your Will or trust.
It is prudent to obtain legal advice before executing any changes, appointments or exclusions in your trust deed to ensure that the changes are made validly.
Family discretionary trusts are also a useful way of holding property on behalf of children to protect the property in the event of a separation. It is important to seek specialised family law advice to understand exactly how property held by a family discretionary trust might be treated in the event of separation, to ensure the intention is what in fact occurs.
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