Setting up a family trust

In order to have a family trust established, you should first consult a lawyer who is familiar with both the legal requirements and the tax rules for family trusts (such as a tax lawyer) – since it is essential that a family trust be created in accordance with trusts law requirements and that it be operated tax-effectively.   Second, you would need to decide who will be the “settlor” (the individual creating the trust), who will be the “trustees” (the “managers” of the trust) and who will be the “beneficiaries” (the family members for whose benefit the trust is being created) of the “discretionary” family trust.   Third, you would need to decide what will be the property of the family trust (the funds to be transferred to the trust by the “settlor” when he or she creates it, called the “trust settlement property”).   Fourth, you would need to have a trust agreement (also called a “deed of settlement”) prepared by a tax lawyer for signing by the “settlor” and the “trustees” – which is the “roadmap” for operating the family trust (including the making of investments by the trustees).   Fifth, you would need to have the “settlor” and the “trustees” meet in order to have the trust settlement property transferred to the trustees and to have the trust agreement signed.


You would also need to consult your accountant, since the family trust would have to a file a tax return each year to report its income and pay tax on any taxable income; however, if the “discretionary” family trust allocates and pays its income to some or all of the beneficiaries, then the beneficiaries (some of whom may be in low tax bracket(s)), rather than the family trust, would be responsible for paying the tax on that income – and consequently some tax savings may be achieved.


A tax lawyer fan help navigate you through this process and help you determine the most appropriate structure for your situation.