Services
Trusts
Table of Pocket Summaries
Term |
Explanation
|
Pocket
|
| Accounting income |
Income for accounting, company law or trust law purposes (as opposed to net income for taxation purposes) |
Family trust & Unit trusts - fixed & hybrid |
| All needs protective trust |
An all needs protective trust is a protective trust established by Will or deed to cover all the needs of a person who lacks decision making capacity or who, in the eyes of the person providing the funding, lacks satisfactory decision making capacity regarding both income and capital investment and expenditure |
Vulnerable beneficiaries |
| Allocated fund |
Also known as a subtrust the assets held by a trustee of a parent trust that have been allocated out of income or capital of the parent trust to a beneficiary or unitholder, but have yet to be paid to (or applied for the benefit of) the beneficiary or unitholder |
Family trust & Unit trusts - fixed & hybrid |
| Allocation of income |
The taxing point for trust income is not when income is paid by the trustee to the beneficiary (or unitholder) or applied for the benefit of the beneficiary by the trustee but when the income is allocated to a beneficiary by the terms of the trust Deed or a resolution of the trustee |
Family trust & Unit trusts - fixed & hybrid |
| Ancillary fund |
A public philanthropic or charitable DGR |
|
| Appointor | The person or persons who holds the power to appoint and remove the trustee of a family trust or other trust (the power of appointment of the trustee is of great significance in discretionary trusts as the trustee has the power to determine which members of the class of beneficiaries are to receive trust income and capital) |
Family trust |
| Beneficial owner |
The legal person entitled to all the benefits of ownership of an asset, notwithstanding that the legal title to that asset may be held by another person |
Family trust & Unit trusts - fixed & hybrid |
| Beneficiary controlled testamentary trust (BCTT) |
A beneficiary controlled testamentary trust is a trust controlled by its primary beneficiary, rather than by the executor of the estate or a 3rd party |
Beneficiary controlled testamentary trusts |
| Capital reserved trust |
A deed trust equivalent of a flexible life |
Type of trusts established by Deeds |
| Charitable trust |
A trust established by Will or deed purely for charitable purposes |
|
| Child support trust |
A (usually excepted income) trust (also known as a child maintenance trust) that is established to cover all or part of an obligated parent's child support responsibilities |
Child support trust |
| Class of beneficiaries |
The potential individual, comany, secondary trust and charitable beneficiaries (defined in the governing trust deed) of a trust that gives its trustee discretion as to the distribution of the trust income and (unless the trust is capital reserved) trust capital |
Beneficiary controlled testamentary trusts, Family trust & Unit trusts - fixed & hybrid |
| Deed trust | A trust established (& documented by a deed of trust) by a living person and commencing during the person's lifetime (also known as a lifetime trust or an inter vivos trust) |
Family trust & Unit trusts - fixed & hybrid |
| Discretionary trust |
A family or other trust with a discretionary class of beneficiaries from which a trustee can choose to distribute trust income or capital |
Family trust |
| Education trust | A trust set up (usually in a Will) to pay for the eduction expenses of minor or young adult beneficiaries of a deceased estate (an excepted income trust established by deed is often used for the same purpose) |
Types of testamentary trusts |
| Excepted income trust |
A trust that generates income that when distributed to qualifying minor beneficiaries is excepted from the penalty income tax rate regime that otherwise apply to minors who are not excepted persons and are in reeipt of trust income |
Death benefits trusts |
| Excepted person |
For income tax purposes is a minor who is able to be taxed as an adult on all forms of income including trust income |
Death benefits trusts |
| Executor controlled testamentary trust |
Executor controlled testamentary trust is a trust established by the terms of a Will where the principal beneficiary of the trust is not empowered to exercise effective control of the trust and instead control is exercised by the person (or persons) appointed by the Will to be the executor and trustee of the deceased estate |
Types of testamentary trusts |
| Expectancy | The interest of a discretionary or defeasible beneficiary of an estate or trust (the interest only becomes vested and indefeasible or absolute if the trustee resolves to distribute trust income or capital or the beneficiary meets a precondition, eg attains 18 years of age) |
Family trust & Unit trusts - fixed & hybrid |
| Family group | The members of a family for the purpose of a family trust election |
Family trust |
| Family trust | This term is most commonly used to describe a fully discretionary trust with a class of beneficiaries centered on an extended family |
Family trust |
| Family trust election |
An election for a trust established by deed or Will to become a family trust for income tax purposes eg to enable dividend franking credits to be claimed |
Family trust |
|
Farm transfer
|
A limited discretionary trust established to meet the Victorian duty exemption requirements for transfers of farming land to the trustee of a trust |
|
| Fixed trust | A trust where the entitlements of the beneficiaries or unitholders are fixed |
Unit trusts - fixed & hybrid |
| Fixed unit trust |
A unit trust where the entitlements of the unitholders are fixed and cannot be overridden at the discretion of the trustee, eg by the issue of further units for less than market value (these trusts are potential real estate investment vehicles for SMSFs) |
Unit trusts - fixed & hybrid |
| Hybrid unit trust |
A trust that has elements of both a discretionary trust (eg in respect of distributions of income and/or capital) and a unit trust (eg in respect of voting entitlements) |
|
| Loan account |
The account in a trust's statement of |
Family trust |
| Non-fixed trust |
A trust where there is at least some element of discretion for the trustee in the administration of the benefits flowing from the trust, eg the ability to make discretionary distributions of trust income and the ability to transfer units at less than market value |
|
| Non-fixed unit trust |
A unitised trust that has some element of discretion for the trustee in the administration of the benefits flowing from the trust |
|
| Pension | Confusingly there are 2 key types of pensions paid in Australia, ie the pension income streams paid by the trustees of superannuation funds and the (frequently means tested) age, disability support and other pensions paid by agencies and departments of the Federal Government, eg Centrelink |
Superannuation |
| Perpetuity period |
Non-South Australian state and territory laws have laws preventing non-charitable and non- superannuation trusts operating in perpetuity (ie with no end date) and have placed limits such as 80 years on those trusts |
Family trust & Unit trusts - fixed & hybrid |
| Philanthropic trust |
A trust established by Will or deed purely for philanthropic purposes |
|
| Prescribed private fund |
A prescribed private fund is a Government |
|
| Primary beneficiary |
The key beneficiary or beneficiaries of a family trust established by Deed or a BCTT and the person or persons from whom other beneficiaries are defined by relationship or association |
Family trust & Beneficiary controlled testamentary trusts |
| Protective trust |
A trust such as an SDT or an ANPT designed to protect assets from the vulnerability of its beneficiaries with the trustee responsible for the management of both trust capital and income |
Vulnerable beneficiaries |
| Resettlement |
A trust is settled when a settled sum is paid |
Family trust & Unit trusts - fixed & hybrid |
| Resolution | In relation to trusts, the document dealing with the distribution of trust income or capital |
|
| Settled sum | The usually nominal amount of money paid by the settlor of the trust to formally establish the trust |
Family trust & Unit trusts - fixed & hybrid |
| Settlor | The person (permanently excluded from being a beneficiary of the trust and thus is often a family friend of the primary beneficiary) who pays the settled sum to the trust of a deed trust and formally starts the trust (almost all fixed unit trusts and many hybrid trusts are established by a subscription of units instead) |
Family trust & Unit trusts - fixed & hybrid |
| Special disability trust (SDT) |
A protective trust established for a means tested pensioner principal beneficiary with a severe disability |
Vulnerable beneficiaries |
| Subtrust (also known as an allocated fund) |
The assets held by a trustee of a parent |
|
| Superannuation death benefits trust |
A trust established by deed for a young child or children of a deceased fund member and funded by the payment of superannuation death benefits |
Superannuation death benefits- payment choices |
| Testamentary trust |
A trust established by the Will (or "testament") of a person who has died |
Types of testamentary trusts |
| Trust | A trust is created by the separation of legal ownership of an asset from the beneficial ownership of an asset |
|
| Trustee | The company or one or more individuals that administer a trust (such as an SMSF, EMSF, family trust, unit trust, hybrid trust or protective trust) and, subject to the terms of the governing trust Deed, makes decisions as to the investment of the trust fund and the distribution of the trust income & capital |
|
| Trustee discretion |
Many trustees of family and hybrid trusts and of EMSFs and SMSFs are given some form of discretion as to the payment of income and capital, including, in the case of superannuation funds the discretion as to whether to commence an income stream or to whom to pay death benefits |
|
| Unit trust | A fixed, non-fixed or hybrid trust, confined to anglophile countries such as Australia, Ireland, New Zealand, Singapore, South Africa and the United Kingdom, that is essentially the trust equivalent of a company where beneficiary ownership is held via by (usually transferable) units |
Unit trusts - fixed & hybrid |
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