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Familt trust activity issues

Discussion in 'Accounting, Tax & Legal' started by JazzMann, 19th Mar, 2011.

  1. JazzMann

    JazzMann New Member

    Joined:
    19th Mar, 2011
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    Location:
    Canberra
    Hi all,
    we have a newly established family trust in South Australia (FYI-if rules change by state).

    Having deposited some cash in the appropriate ATF bank account, am I able to 'withdraw' money from the trust and return it to our personal account in order to pay unexpected bills, ie my boat motor blows up and costs $30K to repair?

    What if any records do I need to maintain?
    I already keep records of interest paid and the like. I havent previously needed to WD monies (and dont need to as yet), but cant get a clear answer from our accountant.

    cheers
    Jazz
     
  2. Terryw

    Terryw Well-Known Member

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    Location:
    Sydney
    Hi Jazzman

    Technically, not really.

    That money is no longer your money. It belongs to the trustee who holds it for all the beneficiaries of the trust. So it just can't be used as if it was your own money.

    There are also various laws surrounding the duties of a trustee. A trustee of the trust cannot act for personal gain at the expense of the beneficiaries for example. If the trustee does, then it is possible that he/she/it can be sued by a beneficiary.

    It may be possible to borrow money from the trust. Check if the trust deed allows it. Or, it may be that the money you put into the trust was a loan and you want it back now.

    But, in practice, you are probably talking about a small trust with a small amount of money. Most of the beneficiaries of your trust would not even know of its existence.
     
  3. JazzMann

    JazzMann New Member

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    Location:
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    trust activity

    Thx Terry.

    Your reply matches with my thoughts. Our accountant is expousing the use of the trust as a tax vehicle and using the money as and when required.

    My current issue is that I would like to add more cash to the trust to be able to distribute the interest/income tax effectively, and would like to be able to access the money if required. Currently we have minutes signed by my wife and I as trustees, placing the money in the trust as a loan, based on advice from the accountant. Is this adequate?

    Do i need to keep minutes of the trustees meetings in order for the monies deposited to be seen as a loan or should i contact a solicitor?

    As you highlighted the beneficiaries are my family (young children) who dont have any role wrt the trust.

    Cheers
    Jazz
     
  4. Terryw

    Terryw Well-Known Member

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    All decisions of the trustee should be recorded in minutes and you should probably have a written loan agreement drawn up. You could probably lend your money to the trust interest free.

    But beware of the asset protection issues too. The money remains yours.
     
  5. JazzMann

    JazzMann New Member

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    19th Mar, 2011
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    Location:
    Canberra
    Thanks Terry.
    My plan would be to have part of the loan returned to me/us as required that would be covered in the minutes.

    My take is that this would be more difficult with a formal loan agreement, unless specified, and become more complex costly and convoluted the more possibilities that are addressed/covered.

    Cheers
    Jazz
     
  6. Tim Somerville

    Tim Somerville Member

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    Location:
    North Sydney, NSW
    If you want to get back some of your cash, the first question is how you put the money in. Usually, a small sum, like $10 is put in to establish the trust, as capital, and any more money is contributed as a loan. The loan is probably repayable at call, so you can take all or some of it out any time you like, as a simple loan repayment. This repayment has no tax or trust law consequences.

    If it was put in as capital, not a loan, it can only be pulled out as a distribution under the terms of the trust deed. Though the trust is for your kids, you are probablly also a beneficiary, so the capital can be distributed to you. This may have tax consequences, so don't do it without talking to your accountant.

    If no accounts have yet been done for the trust, you probably have the flexibility to treat the money you put in as a loan at call, so you just take it back whenever you want.

    As for records, just keep records of all financial transactions, so you accountant can do the books at the end of the financial year.