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Accounting for Assets held by a Discretionary Trust

Discussion in 'General Investing Discussion' started by djb2017, 11th Sep, 2017.

  1. djb2017

    djb2017 Guest

    Hi Everyone, I have a question I am hoping I may get some help on (I've searched the forum but can't find an answer), .. I have a discretionary trust w/ Corporate trustee (NSW).

    In the context of asset protection, if (as trustee) you wanted the Trust itself to hold shares in an overseas corporation which was an investment vehicle, how would you account for it? o

    Do you run two balance sheets (i.e. 1 x for the trustee corp and 1 x for the Trust)?
    and would it be accounted for on both balance sheets?

    I'd really appreciate any help anyone has to offer on this.
     
  2. Terryw

    Terryw Well-Known Member

    Joined:
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    Sydney
    A trust is a relationship and not an entity so it can't really hold anything, but for tax reasons it is treated as if it could. So an assets owned by the trustee in its capacity as trustee would show on the trust's blanace sheets as a trust asset.

    The company itself would only hold, generally, paid up share capital of $2 or so.
     
  3. djb2017

    djb2017 Guest

    thanks Terry. Therefore, the Trust has a Balance Sheet, the Trustee is simply "the manager".

    A further accounting question..
    If the trust requires $100 of initial trust funding, and the Settlor only settles $20 into the Trust Fund to start with, can the balance ($80) be made as a cash gift by the corporate trustee?
    (i.e. proceeds from its own initial capital)
     
  4. Terryw

    Terryw Well-Known Member

    Joined:
    9th Jun, 2006
    Posts:
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    Location:
    Sydney
    I am not an accountant, but this is not really an accounting question, but a legal one. I company can gift, but there are many legal issues. It might be better for an individual to make a gift to the trust. Make sure the deed is not drafted in such a way that a gift giver is classed as a settlor and thereby prevented from benefitting from the trust.