Family trust set up: A comprehensive 8 steps guide on how to set up a family trust in Australia


Are you looking to pass on your wealth and legacy to the following generations?

Setting up a family trust may be the answer you've been looking for, but feel overwhelmed with all the legal details involved? Don't worry – we're here to help!

In this blog post, we'll discuss why setting up a family trust is important to maintain financial security within your family and share a few simple steps to get started.

Key takeaways

Family trusts are a powerful legal tool to help protect assets, preserve private family wealth across generations, and provide tax advantages

Setting up a family trust requires careful planning and consideration of all relevant elements.

Understanding how to set up a family trust in Australia is essential to ensure that your family's financial well-being is secured for the future.

There are several benefits as well as drawbacks to establishing a family trust. Consulting with tax professionals and legal advisors is highly recommended to ensure a successful setup process.

What is a family trust?

A family trust is a legal arrangement often used by family business owners to protect their assets. A family trust is an important part of estate planning and wealth management, as it allows control over how assets are distributed among family members according to one's wishes.

It can take the form of a discretionary trust, where the trustee has full discretion over how much money to give each family member, or it can also be a fixed trust, where family members receive predetermined payments set out specifically in the trust agreement.

A family trust serves multiple purposes such as preserving private family assets across generations and providing tax advantages for family members.

Eventually, it is intended to ensure a family's longevity and smoothen the transition from the control of one generation to another.

Elements of a family trust

Family trusts typically include the following elements:

  • Trust documents

    This legal document outlines how the trust will be managed and how it should operate. It typically includes instructions for asset distribution, trustee remuneration, and other key matters.

  • Trustee

    A trustee is a person or group responsible for managing and administering the trust and making decisions on behalf of its beneficiaries or settlers. A family trust trustee has complete discretion regarding how the trust income and capital are distributed to beneficiaries.

  • Beneficiary

    A beneficiary is a person or group who will benefit from the trust assets. The trust cannot be named as a beneficiary as it is not a legal entity.

  • Settlor

    The settlor is the person or entity that creates and sets up the trust. This can be a single individual, multiple individuals, or even an organisation such as a company or charity. The settlor must have clear intentions and objectives for the trust before setting it up.

  • Assets

    These are the funds that are placed into the family trust, which can include cash, stocks, bonds, real estate, and other investments.

  • Investment strategy

    These are the funds that are placed into the family trust, which can include cash, stocks, bonds, real estate, and other investments.

  • Tax management

    The trust must adhere to applicable tax laws, so trustees must be aware of any relevant regulations that apply to their situation. This can include understanding rules related to income, estate, or capital gain tax.

Protecting Your Family's Wealth

What are the different types of family trusts?

There are several different types of family trusts, all with different purposes and processes. These types of trusts include:

  • Revocable living trusts

    This type of trust is established during the lifetime of the grantor (the person who creates it) and can be amended or revoked at any time.

  • Irrevocable trusts

    A type of trust that is irrevocable and cannot be changed or terminated without the permission of all beneficiaries.

  • Charitable remainder trusts

    A type of trust designed to benefit a charity and provides individuals with income for life or a designated period of time.

  • Special needs trusts

    A trust designed for the benefit of an individual with special needs, protecting them from losing government benefits and providing an additional source of income.

  • Life insurance trusts

    A trust was created to hold life insurance policies, allowing the death benefit to be paid out tax-free to beneficiaries upon the insured’s death.

  • Generation-skipping trust

    A type of trust that allows assets to be passed on to grandchildren or more distant relatives without them being subject to estate taxes.

  • Spend-thrift trust

    This type of trust limits how trust funds can be used and prevent them from being squandered by beneficiaries.

  • Testamentary trust

    This type of trust is created in a will and does not become active until the grantor’s death. The terms of the trust are set out in the deceased individual’s will.

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What are the benefits of forming a family trust?

Establishing a family trust offers many potential benefits to families, including:

  • Asset protection benefits and estate planning

    If there are significant investment assets involved in your business, a family trust can protect them from creditors and asset taxes. Additionally, it can allow for a smooth transition of assets to the next generation.

  • Tax efficiency

    Family trusts can provide tax advantages for beneficiaries, such as deferring or eliminating estate taxes. The advice from tax professionals will help ensure that all available tax advantages are taken care of.

  • Wealth preservation

    Family trusts can help to preserve family wealth and ensure that assets are distributed according to the wishes of the grantor.

  • Avoidance of probate

    By avoiding probate, families can save time and money when it comes to settling an estate.

  • Professional management

    Professional trustees can provide expertise and guidance when it comes to investing, managing, and distributing the assets of a family trust.

  • Control over fund use

    Trustees can control how funds are used and ensure that they are used for their intended purpose.

  • Flexibility

    Families have the flexibility to modify or amend a trust at any time if their circumstances change.

  • Privacy

    Family trusts are private and do not require the same disclosure as other investment vehicles, such as corporations or LLCs.

With our specialised tax packages, you can stay updated on trust laws and remain in regulation without hassle or worry.

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Establishing a Trust: Securing Your Family's Future

What are the drawbacks of forming a family trust?

The potential drawbacks of setting up a family trust include the following:

  • Cost

    Setting up and administering a family trust can be expensive. There are taxes, legal fees, accounting costs, and trustee fees that must be taken into consideration.

  • Complexity

    Family trusts can be complicated to set up and manage and may require the help of a financial or legal professional.

  • Loss of control

    Once the grantor creates a trust, they no longer control the assets and must abide by the terms of the trust.

  • Difficult to revoke

    Due to their irrevocability, family trusts can be difficult to revoke or amend if circumstances change.

  • Difficulty with the transfer of assets

    It can be difficult to transfer certain types of assets into a trust, such as real estate or business interests.

  • Limited lifetime

    Some family trusts have a limited lifetime and must be terminated upon the grantor's death.Additionally, trusts are subject to income and capital gain taxes.

How to set up a family trust in Australia with 8 steps?

Setting up a unit trust can be a complex process that requires careful consideration and planning. The following steps should be taken to set up a unit trust in Australia:

Here are 8 steps to setting up a family trust in Australia:

Step 1:

Determine if a family trust best suits your needs:

It is important to ensure that setting up a discretionary or family trust will meet your financial and estate planning needs. For this, you will need to seek professional advice from a legal or financial adviser.

Step 2:

Choose a trustee and beneficiaries:

The trustee company will be responsible for managing the trust’s assets while abiding by the terms of the trust. You will also need to determine who the beneficiaries of the trust will be.

The trustee of a family trust can be either an individual or a corporate trustee, such as a bank or trust company. In contrast, the beneficiary includes the grantor, their family members or charitable organisations.

Step 3:

Prepare the family trust deed:

The family or discretionary trust deed is the document that outlines the rules and regulations of the family trust. This document should include details such as how assets are to be managed, who has access to funds, and how funds are distributed.

Step 4:

Appoint the trust fund settlor and complete settlement:

A settlor is a person who is responsible for transferring assets into the family trust. The settlor must sign the trust deed to complete the settlement.

Step 5:

Set up a bank account for the trust fund:

You will need to open a trust bank account in the name of the trust. The trustee is responsible for managing and controlling this account and ensuring that funds are used according to the terms of the trust deed.

Step 6:

Register the trust with the Australian Taxation Office (ATO):

A family trust must be registered with the ATO to ensure it complies with tax laws. You can register a trust by submitting an application form and paying any associated fees.

Step 7:

Pay stamp duty:

Depending on the state or territory in which you are establishing your trust, you may need to pay stamp duty. This tax must be paid when transferring assets into the trust. You can determine your stamp duty by visiting each state or territory's relevant revenue authority.

Step 8:

Lodge annual returns with the ATO:

Completing an annual tax return for your family trust should always take place to maintain tax compliance with the Australian Tax Office. There are a few key pieces of information that will be required to lodge an annual trust return such as your tax file number and the income generated from the trust during the financial year.

It's important to remember that once this process is completed, you have access to any tax benefits or concessions for having a family trust.

The income tax implications of setting up a family trust

Setting up a family trust in Australia requires consideration of the income tax implications that come with the arrangement. Establishing the right trust structure can maximize existing assets and create long-term financial security for generations to come.

Generally, trusts are taxed at special rates, depending on whether you have a discretionary or fixed trust. Furthermore, capital gains tax treatment may also need to be taken into account when transferring assets.

Choosing a reputable and experienced legal professional can help ensure that your Australian family trust is properly set up, giving you peace of mind that all trust tax returns requirements are taken care of.


The decision to set up a trust should not be taken lightly, given the complexity of trust law and the commitment required in order to see it through. After reading this post, we hope you have a sound understanding of all the key points involved in the process.

A family trust can provide significant advantages for families and individuals alike both financially and legally. When done properly, a family trust could act as an incredibly helpful financial tool for your loved ones for years to come.

Ultimately, when it comes to establishing a family trust in Australia, it is important to do proper research and consult with legal professionals who are qualified in this particular field.

If you're looking for help with establishing a family trust of your own, then don't hesitate to contact Accuratee today.

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