Clients who are looking to invest for the first time, often ask me, whose name should they invest in? In short, the owner of the investments doesn't always need to be an individual, the investments could be owned by a family trust.
Investors often look to structure the investment ownership in a manner that would result in the lowest amount of tax payable. For example, if you are a member of a couple one way to do this is to invest in the individual's name who is on the lowest tax bracket. Another way to do this is to invest in what is known as a family trust.
A key benefit of a family trust owning the investments is that the trustee of the family trust can distribute income earned by the trust in any way they see fit. This often involves distributing income to a lower-income earning spouse, child, or grandchild, for example, that would reduce the level of income tax payable.
The benefits do not stop there. Family trusts provide asset protection, with the legal owner of the assets being the trust, not the individual. Family trusts are also accommodating with regard to succession planning and the intergenerational transfer of wealth.
There are other considerations to keep in mind before establishing a family trust. There are setup costs that are incurred to establish the trust. There are also ongoing annual accounting fees for the lodgement of an annual tax return. A trust cannot allocate losses to beneficiaries, therefore if investment losses are anticipated then this should be carefully planned.
There is no doubt family trusts can offer considerable advantages. If you think a family trust may provide a benefit to your situation, I encourage you to contact your adviser at Hewison Private Wealth and your taxation accountant to discuss the benefits to your specific situation.
Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email email@example.com or visit www.hewison.com.au
Please note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.