Trust funds are a common way to manage money, especially for people who want to ensure that their money is used for a specific purpose. For those interested, click here to open a trust account. Trust funds can be used for various things, such as estate planning, investing, and charitable giving. However, before setting up a trust fund in Australia, you must know some things.
Choose your trustees
The first thing to do is choose your trustees. Trustees are the people who will manage the trust fund and make sure that the money is used according to your wishes. Depending on your precedence, you have a choice of having one or multiple trustees. If you have multiple trustees, you’ll need to decide how they will decide about the trust fund. For example, you can have a majority vote rule, where more than half of the trustees must agree on any decision about the trust fund.
Decide how the trust fund will be used
The next step is to decide how you want the trust fund to be used. It includes deciding what the beneficiary will use money in the trust fund for and how to distribute it. For example, you might want to set up a trust fund for your children’s education. In this case, you would need to determine how the money will be used (for tuition, books, etc.), how it will be distributed ( monthly, quarterly, etc.), and when it will be distributed (after high school, after college, etc.).
Set up the trust fund
Once you’ve chosen your trustees and decided how to use the funds, you’ll need to set up the trust fund. It includes opening a bank account in the name of the trust fund and transferring money into the account. You’ll also need to create a trust deed, a legal document that outlines the rules of the trust fund.
Manage the trust fund
The final step is to manage the trust fund, which includes ensuring that the trust fund is being used according to your wishes and keeping track of the trust fund’s expenses. Trustees can also invest the money in the trust fund, which can help it grow over time.
Benefits of setting up a trust fund in Australia
Here are some benefits of setting up a trust fund.
It can protect your assets
Setting up a trust fund can help you protect your assets because the assets in the trust fund are not owned by you but by the trust, resulting in them not being subject to your creditors if you become bankrupt.
You can control how the beneficiaries use your assets
Another benefit of setting up a trust fund is controlling how your assets are used because you can specify in the trust deed what the beneficiaries should use the money for. For example, if you want to set up a trust fund for your children’s education, you can specify that they can only use the money for tuition and books.
You can choose who will manage the trust fund
Another benefit of setting up a trust fund is choosing who will manage it. It includes choosing how many trustees there will be and how they will make decisions about the trust fund.
It can help you to manage your money
Finally, setting up a trust fund can help you to manage your money because the trustees are responsible for managing the trust fund and ensuring that the money is used according to your wishes.
Risks of creating a trust fund
Here are the risks of creating a trust fund.
It can be expensive to set up
One of the risks of setting up a trust fund is that it can be expensive because you’ll need to pay a lawyer to draft the trust deed and set up the trust fund.
The trustees could misuse the trust fund
Another risk of setting up a trust fund is that the trustees could misuse it. For example, they could use the money for their purposes instead of for the benefit of the beneficiaries.
The trust fund could lose money
Another risk of setting up a trust fund is that it could lose money. It can happen if the investments in the trust fund don’t perform well or if the trustees make bad decisions about how to manage the trust fund.