Trusts are useful structures to control the flow of income from a particular property or business to the beneficiaries. By controlling the flow of income each beneficiary can control their own financial planning individually with tax being payable on an individual basis. Certain trust deeds can also be drafted to become effective asset protection structures.
Unit trusts is one of the major form of trusts. In this structure beneficiaries subscribe to units of a trust, a bit like how shareholders have shares in a company. The share of the income of the trust property distributed will depend on how many units a beneficiary has under the trust.
There may be different class of unitholders similar to how there are different class of shareholders. For example if the trust property is an investment property, a certain beneficiary may acquire rental income only, while another beneficiary will acquire capital gain if the investment property is sold. But unlike a company the trust itself does not incur tax. The beneficiaries who obtain a benefit will incur the tax liability individually.
The other major form of trusts is known as discretionary trusts. Discretionary trusts are flexible structures for families. Compared to unit trusts where the beneficiaries are entitled to the income of the trust property, the trustee can decide who to distribute the income to which beneficiary.
The beneficiaries can only be considered by the trustee and are not entitled to demand a share of the income. Discretionary trusts are useful for directing the flow of income to different beneficiaries. This has the benefit of income splitting so that the family members can obtain the optimum tax positions every year. a new lease at the end of the first term. Because of this, it will be almost impossible to sell a business without a lease. It’s therefore a smart move to negotiate an option for a new lease.