What to do with settled sum? (family trust)

Discussion in 'Accounting and Tax' started by cdremy, 10th Sep, 2011.

  1. cdremy

    cdremy Member

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    Hello all,

    I am just curious what the correct thing to do with the $10 settled sum to create the family trust?

    It was suggested to me I should make it the initial deposit into the trusts' bank account, but to me that doesn't look right, as wouldn't it then appear on the bank statement as if I had given the settled sum rather than the settlor? I would presume this would then invalidate the trust and give me a whole lot of taxation issues I don't want to think about.

    Would be grateful for any feedback on what the members of somersoft have done for their trusts.

    Cheers.
     
  2. Peter_Tersteeg

    Peter_Tersteeg Finance broker/strategist

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    A lot of people actually staple a $10 note to the main copy of the trust deed.

    In other cases, no money ever really changes hands, it's just a token amount.

    Keep in mind, I don't know what actually is legally correct.
     
  3. Aaron_C

    Aaron_C Finance Broker

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    From a practical perspective no one cares about the $10.....it doesn't actually change hands it's just a nominal sum specified on the trust deed to start the trust.
     
  4. Terryw

    Terryw Investor

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    The trust is started off with the settled sum, usually just $10 (to minimise stamp duty). The trustee has to hold the trust property on trust under the terms of the deed for the benefit of the beneficiaries. So the trustee should hold the initial settled sum and any other property the trust receives. This could be done in a bank account or could be physical possession (held with the deed).

    For there to be a trust there needs to be trust property. I think that is why some recommend stapling the $10 to the deed as that would mean there is always trust property in existence. If you had placed the money in a bank account and then sold a property and distributed some money you may find the bank balance could reach $0 at some stage and the trust would then cease to exist. This could cause problems with carrying forward any losses etc.
     
  5. cdremy

    cdremy Member

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    Thanks all for the feedback.

    I think the safest thing to do would be to staple the settled sum to the trust deed.
     
  6. Ed Barton

    Ed Barton Advance Australia fair

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    write some details on the note; that seems a dying tradition in Australia.