Family Trust vs Self Managed Superannuation Funds

As a direct result of focus being placed on SMSF Adviser less attention has been directed to the merits of the family trust. Family trusts still provide tremendous flexibility as a vehicle for managing investment portfolios and family wealth. Rather than as a comparison to SMSF’s, the family trust compliments the SMSF.

A family trust is a discretionary trust that has elected with the ATO to distribute the trust’s annual income only to predetermined family member beneficiaries. The definition of family members can include parents, grandparents, siblings, children, nephews, nieces, lineal descendants and spouses of any of these.

The beneficiaries of the family trust income distributions are required to pay tax on that income. But distributions don’t have to be made equally to all family member beneficiaries. The trustee has the discretion to decide which family members receive an income distribution, with the general aim being to make a distribution to family members with the lowest taxable income, who will in turn pay the least amount of tax.

Family trusts have a number of advantages. These include:

•           The facilitation of intergenerational wealth transfer,
•           no limit on the contributions that can be made to the trust,
•         the ability to income split with family members, providing substantial tax benefits, particularly where there are low-income earners in the family,
•           no age limits to access funds,
•          the ability to hold personal-use assets, such as a holiday home,
•           the ability to run a business through the trust, and
•          estate planning flexibility.

Through a family trust, ownership of assets, such as a share portfolio or holiday house, can continue uninterrupted, even if a family member dies. This is because the family member doesn’t own the asset, the trust does, and consequently the assets don’t form part of the individual’s estate.

This makes family trusts an ideal tool for multi-generational wealth transfer, while SMSF’s, on the other hand, must be wound up upon the death of the last member. This course of action can also raise tax issues.

When it comes to the best Financial AdvisorSydney, Peter Quinn from Quinns Financial planning has a team of experienced Financial Adviser.

Should you be considering a family trust or require any further information, please contact Peter Quinn by submitting an online enquiry or calling us on +61 2 9580 9166 to book an obligation freeappointment.

Peter Quinn from Quinns financial planning is the best SMSF Adviser in Sydney to wisely handle your financial planning for the future.

Please visit our website www.quinnfinancialplanning.com.au for more details.