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The idea is the trustee would redeem the units and then start distributing the income of the trust to the discretionary beneficiaries. But there are CGT and stamp duty issues with redemption of units.

Depends on the wording of the deed. Children generally would automatically become beneficiaries but only if the wording is right. Spouse may too - but what is the definition in the deed, would a defacto be classed as a spouse. 2) Under tax law a unit holder couldn't claim interest to buy the...

They would be already beneficiaries. If you are considering distributing income to them then you will have to weigh this up with the unit holder claiming the interest. If the unit hold claims the interest they must be entitled to all the income and capital of the trust.

Do you mean you would be the only unit holder while negative gearing mode? There would be a wide class of discretionary beneficiaries separately, probably. Trustees may be able to amend the deed to add beneficiaries but only if the deed permits. This may be a resettlement and result in CGT...

What are the benefits that you are thinking of?

Do your research. :D