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Set-up Disc Trust for non-existent people?

Discussion in 'Estate Planning' started by Insan3, 7th Mar, 2008.

  1. Insan3

    Insan3 Active Member

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    Cairns, QLD
    I'm trying to find out if it is possible for people not yet existent to be appointed as beneficiaries of a Discretionary Trust.... ie: Grandchildren that are yet to be born. Can this be done?

    ie:

    Jack and Jill writing their wills.
    One child, Melissa.
    Melissa has 0 children.
    Jack and Jill want to leave Shares to Melissa's children, when/if she has them.

    Thanks for your help guys!
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    It all depends on how the trust deed is written - trust deeds are generally either quite specific or very broad. It is usually a good idea to go broad in the definition of beneficiary - since adding a beneficiary at a later date could result in the trust being resettled - and you pay stamp duty on the entire value of the trust assets, which could get very expensive.

    For example, my discretionary trust defines the class of "general beneficiaries" to include not only my wife and I, but also:

    Then it is up to the trustee of the trust to determine which of the beneficiaries actually receives the trust distributions.

    We use a corporate trustee, of which my wife and I are shareholders, and in the case that we both die, our wills pass the shares in that corporate trustee to the beneficiaries of our will - and thus they gain control over the actions of that trust with the intention that they then continue to operate the trust for the benefit of the trust beneficiaries.

    It's a pretty complex area - so good advice is required ... both in setting up a good discretionary trust and also in getting a good will (if you have a trust - make sure you have a will !!)
     
  3. Nigel Ward

    Nigel Ward Team InvestEd

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    Yes absolutely. But don't confuse wills and trusts (altho you can have testamentary trusts which are created on your death by will...)

    Talk to your lawyer.

    Cheers
    N
     
  4. Insan3

    Insan3 Active Member

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    Location:
    Cairns, QLD
    Thanks for the responses guys.

    Just to dig a little further, how would the Testamentary Trust be done in the Will to ensure this occurs? You create a seperate Fixed Testamentary trust and specify the conditions of how income and shares are to be dispersed??? If it was discretionary, then the trustee could manipulate the instructions...

    Or am I heading in the wrong direction now??
     
  5. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    The idea with the testamentary trust is to make the controllers (trustees) people you trust to look after the beneficiaries. You can hire professionals to do this if you don't have family you trust.

    At the end of the day - you are dead - it's no longer your problem, so don't go to great lengths to try and set rules (you generally can't anyway) - situations change and flexibility is often the key.
     
  6. Terryw

    Terryw Well-Known Member

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    You could word your will so that this is possible. Just make sure you have a residual clause in case Melissa doesn't have any children.

    You could also set up your trust so that the beneficiaries are Melissa and her descendants. You could have these people as the sole beneficiaries or you could have others in there as well. You need to be careful as if Melissa is the only living beneficiary and then she dies early without any children then the trust may fail.