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Family Trusts: What They Really Do—And Should You Have One? · She's On The Money

• 0:00
  Speaker 1: Hello, my name's Satasha Nabananga Bamblet. I'm a proud or
• 0:04
  Speaker 1: the Order Kerni Whoalbury and a waddery woman. And before
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  Speaker 1: we get started on She's on the Money podcast, I
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  Speaker 1: would like to acknowledge the traditional custodians of the land
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  Speaker 1: of which this podcast is recorded on a wondery country,
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  Speaker 1: acknowledging the elders, the ancestors and the next generation coming
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  Speaker 1: through as this podcast is about connecting, empowering, knowledge sharing
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  Speaker 1: and the storytelling of you to make a difference for
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  Speaker 1: today and lasting impactful tomorrow.
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  Speaker 2: Let's get into it.
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  Speaker 3: She's on the Money, She's on the Money.
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  Speaker 4: Hello, and welcome to She's on the Money. The podcast
• 1:00
  Speaker 4: us that helps you master your finances so hard your
• 1:03
  Speaker 4: accountant will be shaking in their boots.
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  Speaker 2: Oh my gosh, you want to make an accountant scared?
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  Speaker 4: Yeah, kind of.
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  Speaker 1: No.
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  Speaker 2: I just want them to be to be proud of you. Proud.
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  Speaker 4: They're going to be proud. So when you hear the
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  Speaker 4: words family trust, do you immediately think of rich families
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  Speaker 4: in babies finding over their fortunes, you know, the succession
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  Speaker 4: or knives out kind of vibe where it's all private
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  Speaker 4: Jets secret inheritances.
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  Speaker 2: Yes, that's trust fund, baby, that's.
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  Speaker 4: All we're thinking. Well, we're here to tell you that
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  Speaker 4: family trusts aren't just for the mega wealthy, and they're
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  Speaker 4: definitely not just a Hollywood plot point.
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  Speaker 2: Oh, that's quite disappointing. So you're going to make it
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  Speaker 2: boring for us to make it out every single family
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  Speaker 2: trust as a very basic tax structure. Absolutely, how boring.
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  Speaker 4: Let's see if we can make this as boring as possible.
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  Speaker 4: But this is the main thing. Is a family trust
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  Speaker 4: the right thing for you?
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  Speaker 2: Are you a rich mad dog?
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  Speaker 4: Secretly?
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  Speaker 2: Really, we're going to find out.
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  Speaker 4: I'm excited, and with me is the money expert who's
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  Speaker 4: going to help us figure it all out. Victoria Divine, Hello.
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  Speaker 2: I'm very excited to talk about this topic. I used
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  Speaker 2: to work in the family wealth space, and like I
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  Speaker 2: had exposure to billion dollar families, which is where I
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  Speaker 2: learned about family trusts, not because I grew up wealthy.
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  Speaker 2: I feel like, I don't know, maybe my parents this
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  Speaker 2: would be good. Maybe your parents are doing the same thing.
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  Speaker 2: They just wanted really humble down to earth kids. Good
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  Speaker 2: luck that didn't happen for me, but they wanted that,
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  Speaker 2: so they didn't tell me about the family wealth. And like,
• 2:32
  Speaker 2: one day, I know I'm going to walk into my parents'
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  Speaker 2: house and they say the we were trying to teach
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  Speaker 2: you to be humble, but we're actually super rich and
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  Speaker 2: you have a family trust set out for you. I'll
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  Speaker 2: be like, of course that makes sense.
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  Speaker 4: Of course they're gonna be like, well, it's I was
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  Speaker 4: not working, so we'll just give.
• 2:48
  Speaker 2: You the money.
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  Speaker 4: We'll just give you the money.
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  Speaker 2: No, I don't think that's going to happen. I have
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  Speaker 2: asked my dad before, like, hey, where are all the
• 2:54
  Speaker 2: houses that you meant to gift me? He's like, oh,
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  Speaker 2: I think they got lost in the mail. Like so
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  Speaker 2: sorry about that of the male I know or something? Yeah,
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  Speaker 2: Like what dad, I thought that I was born rich?
• 3:05
  Speaker 4: Yeah? Like okay, jokes over guys, Yeah, like my house.
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  Speaker 2: Do you have this all the time too? All the time? Anyway.
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  Speaker 2: I feel like every time we do a call out
• 3:13
  Speaker 2: for episode ideas, this topic always pops up, like literally
• 3:18
  Speaker 2: every single time. It's always in the dams, it's always
• 3:20
  Speaker 2: in our question boxes. So I guess we're finally delivering
• 3:24
  Speaker 2: what you've been asking for and we are breaking down
• 3:26
  Speaker 2: family trusts, what they are, how they work, whether you
• 3:30
  Speaker 2: actually need one, And as you said back, when you
• 3:32
  Speaker 2: hear family trust, it's super easy to picture I guess
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  Speaker 2: dramatic rich families in movies they're fighting over in inheritance.
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  Speaker 2: They're probably at a mahogany dining table doing so if
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  Speaker 2: there's a maid in a maid's outfit, it's very stereotypical.
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  Speaker 2: But thinking about a dish, Yeah, yeah, yeah, exactly. But
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  Speaker 2: here's the thing. Family trusts. They actually can be a
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  Speaker 2: very smart financial tool for regular Joe blows, for normal people,
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  Speaker 2: not just people who have millions and are super wealthy.
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  Speaker 2: But and I guess this is a very big butt.
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  Speaker 2: There are some, if not a lot, of rules, risks,
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  Speaker 2: and costs that you need to know about before you
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  Speaker 2: jump on the bandwagon and go, oh, this might be
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  Speaker 2: right for me. So we're going to go through all
• 4:13
  Speaker 2: of them, and I'm hoping that we can do it
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  Speaker 2: in an exciting way. Oh yeah, because honestly, this can
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  Speaker 2: be a little bit bland.
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  Speaker 4: So what actually is a family trust?
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  Speaker 2: A family trust, it's a legal structure I'm already designed
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  Speaker 2: to hold and manage assets. Yes, So you could think
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  Speaker 2: of it like property or some shares or a family business,
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  Speaker 2: and it holds it on behalf of a group of people,
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  Speaker 2: not necessarily just one person, although it could be one person,
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  Speaker 2: and it's usually get these your family.
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  Speaker 4: It's not always money.
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  Speaker 2: I just know it could be assets. I could be assets.
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  Speaker 2: And it's also known as a discretionary trust. This is
• 4:53
  Speaker 2: a complicated bit and I wish I could stand up
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  Speaker 2: with a whiteboard because when I used to explain this
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  Speaker 2: to clients, I'd be like, sit there, if you've got
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  Speaker 2: a couple, I'm going to do some drawings on the
• 5:01
  Speaker 2: whiteboard about how the family trust works. And I would
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  Speaker 2: like draw this big umbrella and put like your name's
• 5:07
  Speaker 2: up the top and show you how this works. But essentially,
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  Speaker 2: the trust itself doesn't own the assets. You need to
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  Speaker 2: think about the trust like a bucket. The bucket just exists.
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  Speaker 2: And just because you put something in the bucket, does
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  Speaker 2: it mean that the bucket owns the ball?
• 5:23
  Speaker 4: Oh? No?
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  Speaker 2: Like, so say you own a basketball, beck and then
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  Speaker 2: there's a bucket over there, and I say, go put
• 5:29
  Speaker 2: your basketball in the bucket, neat and tidy. Do you
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  Speaker 2: still own the basketball? I would like to think so, yeah,
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  Speaker 2: But you just put your basketball in the bucket. Yes,
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  Speaker 2: the person in charge of this bucket.
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  Speaker 4: So there's a keeper of the bucket, keeper of the bucket,
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  Speaker 4: keeper off of the bucket the things inside necessarily.
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  Speaker 2: Which is also the keeper of the trust. They're called
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  Speaker 2: the trustee, yes, and then the ogre at the front
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  Speaker 2: gate of the bucket. They decide how the income and
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  Speaker 2: assets are distributed to the beneficiaries. So once you put
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  Speaker 2: in the bucket, we go, Beck. You can't just go
• 6:00
  Speaker 2: pull it out whenever you want. You put it in
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  Speaker 2: the bucket, but there's gatekeeper at the door that says, oh,
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  Speaker 2: did you want to use your ball? No worries your back.
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  Speaker 2: You're on the list. You're on the door list. That's
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  Speaker 2: all good. You can come in, you can use a ball,
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  Speaker 2: but put it back up when you're done.
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  Speaker 4: Yep, okay.
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  Speaker 2: So the bucket is like a safe spot. It's guarded,
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  Speaker 2: it's looked after. If people were looking into you, Beck
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  Speaker 2: and going to she own a basketball, hold on, we're
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  Speaker 2: just going to check Beck. I can't see the basketball.
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  Speaker 2: Hard to say, I'm the tax man. Beck must not
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  Speaker 2: own it because it's over there in the bucket. Right,
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  Speaker 2: looks legitimate because that trust acts as an individual when
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  Speaker 2: it comes to tax. So then go and look at
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  Speaker 2: the bucket as though that bucket was a human being,
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  Speaker 2: and go, well, what's in the bucket? And they'd be
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  Speaker 2: like a ball, All right, Well we'll tax that bucket,
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  Speaker 2: not Beck, because we just checked Beck. Beck doesn't have
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  Speaker 2: a basketball. Yeah yeah, yeah, does that make sense? I
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  Speaker 2: feel like it's not making sense.
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  Speaker 4: It does.
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  Speaker 2: Basically, you've got someone who is the decision maker of
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  Speaker 2: the trust and they decide how you get access to
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  Speaker 2: your basketball. They decide how you can use it, when
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  Speaker 2: you can use it, whether you can sell it, whether
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  Speaker 2: you can share it with your friends, whether you can
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  Speaker 2: rent that basketball out to your friends and make some money.
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  Speaker 2: But if you rented it out to your friends and
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  Speaker 2: made some money, that has to go back in the
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  Speaker 2: bucket because the basketball and all of its assets live
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  Speaker 2: in the bucket.
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  Speaker 4: So if the keeper of the bucket, if it's like
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  Speaker 4: tax time, so in the bucket is like thirty thousand
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  Speaker 4: dollars worth of assets, the tax person will tax the
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  Speaker 4: bucket separately as if it's its own entity.
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  Speaker 2: So I'll knock on the door and be like, hello,
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  Speaker 2: mister trustee, can we look in your bucket.
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  Speaker 4: And if there's thirty thousand dollars worth of stuff in there,
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  Speaker 4: then they'll just tax thirty thousand dollars.
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  Speaker 2: Yes, ah, they're not going to just make it up
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  Speaker 2: and pick random numbers.
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  Speaker 4: No, but it doesn't go on to anyone else's.
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  Speaker 2: No, No, it's not tied to you. You're just a beneficiary,
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  Speaker 2: so you're not going to be taxed individual. And again
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  Speaker 2: I'm not an accountant, so talk to your accountant about
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  Speaker 2: how this works. But you're just listed as a beneficiary
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  Speaker 2: of that trust. So I mean if you had some
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  Speaker 2: money distributed to you, so say, you know, there's thirty
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  Speaker 2: thousand dollars in that bucket, and this year you said, hello,
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  Speaker 2: mister trustee, I would like some income, and I gave
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  Speaker 2: you five thousand dollars. Now you've got that five thousand dollars.
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  Speaker 2: You might be taxed on that. You need to declare
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  Speaker 2: it because now it's become personal income instead of income
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  Speaker 2: inside the bucket. Understood, But for the time that it
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  Speaker 2: lives in its little bucket, it stays in the bucket,
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  Speaker 2: and it will only be taxable by you personally if
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  Speaker 2: you took it out forever. Okay, So basically the trustees,
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  Speaker 2: the decision maker, and then the beneficiaries are the ones
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  Speaker 2: who get the financial benefits. But there's so many bucks
• 8:48
  Speaker 2: in this episode, and this is I think very important.
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  Speaker 2: The trustee doesn't just make decisions on a whim. And
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  Speaker 2: as I said before, you don't just go no, not
• 8:56
  Speaker 2: can I hear? Just have the money and then they go,
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  Speaker 2: let me think about it. They actually have to follow
• 9:01
  Speaker 2: what's called a trust deed, and that's like an instruction
• 9:04
  Speaker 2: manual or a rule book associated with the trust. And
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  Speaker 2: that rule book there's a standard one, so if you
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  Speaker 2: open a trust in Australia, it just comes with a
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  Speaker 2: standard trusteed and you can edit that rule book when
• 9:17
  Speaker 2: you set it up because you haven't signed anything yet,
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  Speaker 2: and I might go, oh, Becky, here are some extra
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  Speaker 2: rules on the rule book. And a good example of
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  Speaker 2: this is let's say I'm setting up a family trust
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  Speaker 2: and I'm your mom, and I go, all right, I've
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  Speaker 2: got some money. I've got my thirty thousand dollars in
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  Speaker 2: my trust, and I want beck to benefit from this.
• 9:33
  Speaker 2: And I'm really excited about this because I'm just setting
• 9:35
  Speaker 2: myself up for future wealth. But also I saw this
• 9:38
  Speaker 2: a fair bit when I was managing family wealth. The
• 9:41
  Speaker 2: parents don't want you getting the money if you're being
• 9:44
  Speaker 2: a little bit naughty, right, So like if you're addicted
• 9:47
  Speaker 2: to drugs, if you haven't completed school, if you haven't
• 9:52
  Speaker 2: done the things that they stipulate. There could be a
• 9:54
  Speaker 2: rule that says, okay, if beck does any of these things,
• 9:58
  Speaker 2: she doesn't get her payouts, and that can go in
• 10:01
  Speaker 2: the trusteed. The trust need starts as all of the
• 10:03
  Speaker 2: basic requirements, nothing shiny, nothing exciting. But because the trust
• 10:08
  Speaker 2: deed is being set up by somebody who wants to
• 10:10
  Speaker 2: control it, they can put whatever they want in it.
• 10:14
  Speaker 2: They could write Beck hasterwear green every day, otherwise she
• 10:16
  Speaker 2: doesn't get her money.
• 10:18
  Speaker 4: Okay, I can abide by that.
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  Speaker 2: I think that the important thing here is those rules
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  Speaker 2: could be as rogue as you want. Historically, I've also seen,
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  Speaker 2: and this was a billion dollar family, if the grandkids
• 10:30
  Speaker 2: didn't come to Christmas for two years running, they didn't
• 10:34
  Speaker 2: get their trust distribution.
• 10:36
  Speaker 4: That oh wow, so you.
• 10:37
  Speaker 2: Wouldn't get paid. So if you don't come to Christmas,
• 10:40
  Speaker 2: grandparents aren't giving you some cash all all of a sudden.
• 10:43
  Speaker 4: I love Christmas, yeah, all of a sudden.
• 10:45
  Speaker 2: But that's a good example of you know, a rule
• 10:47
  Speaker 2: that was put into a trusteed by a family to
• 10:50
  Speaker 2: manage the wealth and manage how it was distributed and
• 10:53
  Speaker 2: just what they wanted. Sure, no judgment, Like literally, you do,
• 10:56
  Speaker 2: you your money, you can distribute it however you want.
• 10:59
  Speaker 2: But I have seen people limit it like this money
• 11:01
  Speaker 2: will be distributed to back when she turns eighteen if
• 11:05
  Speaker 2: she's in university. Sure, if she's not, it's twenty five.
• 11:09
  Speaker 2: So they can make up with their own rules anyway, Okay,
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  Speaker 2: got you. Indeed literally just sets out how the trust
• 11:14
  Speaker 2: can operate, who the beneficiaries are, what the trustee can
• 11:18
  Speaker 2: and can't do. So you're making rules for the gatekeeper
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  Speaker 2: as well. So I guess in short, the deed is
• 11:23
  Speaker 2: what keeps the trust fair, legal and running really smoothly.
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  Speaker 4: I am really curious to know, like how to actually
• 11:30
  Speaker 4: set up.
• 11:31
  Speaker 2: And I'll tell you all about how to set up
• 11:33
  Speaker 2: a trust. Okay, but actually good idea. Let's go to
• 11:36
  Speaker 2: a break and on the flip side, I'm gonna talk
• 11:39
  Speaker 2: to you about how family trust can save you money
• 11:41
  Speaker 2: when done right. What's setting up one takes and what
• 11:44
  Speaker 2: it's going to cost. And we'll get into the needy gritty.
• 11:47
  Speaker 4: Great, welcome back everyone. We woo.
• 11:53
  Speaker 2: We're talking about family sure us.
• 11:55
  Speaker 4: Whom as something very very exciting today family trusts. So
• 12:00
  Speaker 4: before we went to the break, I was wanting to know,
• 12:03
  Speaker 4: like how you set up a trust and how you
• 12:06
  Speaker 4: even take money out or assets out how it were,
• 12:08
  Speaker 4: and also like what goes into running one, Like is
• 12:11
  Speaker 4: it as complicated as it sounds?
• 12:13
  Speaker 2: Yes and no. So there's a bit of admin involved
• 12:17
  Speaker 2: and every single year a family trust has to have
• 12:21
  Speaker 2: prepared a set of financial statements, just like a company would.
• 12:24
  Speaker 2: So I think one of the best ways to think
• 12:26
  Speaker 2: about a family trust is that it's a business. It
• 12:29
  Speaker 2: doesn't have any products, it doesn't have any services, but
• 12:31
  Speaker 2: it's going to act in isolation over there, sure, and
• 12:34
  Speaker 2: it's going to hold some assets. So these financials they're
• 12:38
  Speaker 2: going to calculate how much profit the trust made basically
• 12:42
  Speaker 2: all the income earned by the trust and then minust
• 12:45
  Speaker 2: sixpenses and any carryover losses for them like previous years exce.
• 12:50
  Speaker 4: Feel like if a trust has got shares in it.
• 12:52
  Speaker 2: For anything, Okay, So in the same way that you
• 12:54
  Speaker 2: and I would sit down and do your tax return
• 12:57
  Speaker 2: and we go beck, how much did you earn this year?
• 12:59
  Speaker 2: All right, did you have any expenses where you can claim, Oh,
• 13:01
  Speaker 2: yeah you did. You did some travel, okay, no worries.
• 13:04
  Speaker 2: Did you do some side hustles? Yeah, yeah you did?
• 13:06
  Speaker 2: All right, what profit did you make? And like, we're
• 13:08
  Speaker 2: just doing like a P and L for the trust
• 13:10
  Speaker 2: in the same way that I would do your tax reporting.
• 13:13
  Speaker 2: But we need to get all of the admin together.
• 13:15
  Speaker 2: And you know, if last year you had a loss,
• 13:18
  Speaker 2: we would be able to carry that forward. You can
• 13:20
  Speaker 2: do the same thing in a personal trust. Then once
• 13:24
  Speaker 2: the profit has been calculated, same theory I suppose is
• 13:28
  Speaker 2: me calculating how much you earned in total this year,
• 13:30
  Speaker 2: which is hard to do right now. Until June, I
• 13:34
  Speaker 2: can't sit down and be like, oh how much did
• 13:36
  Speaker 2: you make this year? Back we go, well, I know
• 13:38
  Speaker 2: what my annual salary is, but I don't know what
• 13:39
  Speaker 2: my side hustles did. So like we have to wait
• 13:42
  Speaker 2: until a certain period of the year to be able
• 13:44
  Speaker 2: to calculate this. But once the profit is calculated at
• 13:47
  Speaker 2: the end of the financial year, the trustee gets to
• 13:49
  Speaker 2: work deciding how they're going to split that profit among
• 13:52
  Speaker 2: the beneficiaries, so you know who gets what slice of
• 13:56
  Speaker 2: the pizza. But here is the important bit. The trust
• 14:00
  Speaker 2: itself doesn't pay tax on the profits.
• 14:04
  Speaker 4: Oh okay, so you do.
• 14:09
  Speaker 2: The asset owner or the Yeah, so it's living in
• 14:12
  Speaker 2: the bucket, and the bucket is self sufficient. The beneficiaries
• 14:16
  Speaker 2: pay tax, so whatever amount is distributed to each beneficiary.
• 14:20
  Speaker 2: So like as we said before, there's thirty thousand dollars
• 14:23
  Speaker 2: in the bucket and we gave you five thousand dollars,
• 14:25
  Speaker 2: you might not be the only beneficiary, but the profits
• 14:29
  Speaker 2: of that So you could park thirty grand in there.
• 14:32
  Speaker 2: And then if in one year we looked at it
• 14:35
  Speaker 2: and there's still only thirty thousand dollars, we wouldn't be
• 14:38
  Speaker 2: declaring a profit because the trust just still has the
• 14:41
  Speaker 2: same assets in it. It hasn't made any money. Yeah,
• 14:44
  Speaker 2: But if that thirty thousand dollars was invested and we
• 14:47
  Speaker 2: made one thousand dollars, the ATO would go, oh, how
• 14:50
  Speaker 2: much is in the account or how much is in
• 14:52
  Speaker 2: the trust, And we'd go, well, it's thirty one thousand
• 14:54
  Speaker 2: dollars and the ATO would go, okay, cool, how much
• 14:58
  Speaker 2: was in there to begin with than dollars? Great, you've
• 15:00
  Speaker 2: made a thousand dollar profit. We're going to tax you
• 15:02
  Speaker 2: on the thousand dollar profit.
• 15:04
  Speaker 4: Tax everyone who.
• 15:05
  Speaker 2: So we're going to be taxing the beneficiaries because the
• 15:09
  Speaker 2: profit can't stay in the trust. The profit has to
• 15:12
  Speaker 2: be taken out of the trust and distributed to you.
• 15:16
  Speaker 2: So the thirty thousand dollar asset can be parked over there,
• 15:18
  Speaker 2: But if we made a thousand dollar profit, we need
• 15:21
  Speaker 2: to distribute it. So if you're a beneficiary and you
• 15:23
  Speaker 2: already have a salary for a job, that trust is
• 15:27
  Speaker 2: on top of that, and you'll be taxed at your
• 15:29
  Speaker 2: individual tax rate. Let's say you've got I know what
• 15:32
  Speaker 2: your job is. You pay thirty two and a half
• 15:35
  Speaker 2: cents every dollar that you earn. Yep. So if I
• 15:39
  Speaker 2: then distributed another one thousand dollars to you this year, Beck,
• 15:43
  Speaker 2: you would be paying thirty two and a half cents
• 15:46
  Speaker 2: in the dollar. So you would be paying three hundred
• 15:48
  Speaker 2: and twenty dollars in tax on that, and you would
• 15:50
  Speaker 2: take the profit home.
• 15:52
  Speaker 4: Okay, got you?
• 15:53
  Speaker 2: Hold on backtrack, Beck, I think I need to correct myself. Oh,
• 15:56
  Speaker 2: I think I said that you were paying thirty two
• 15:58
  Speaker 2: and a half cents in the dollar. Yeah, tax, which
• 16:01
  Speaker 2: would have been correct, but the tax rates have just
• 16:04
  Speaker 2: changed so if I'm not wrong for this year, so
• 16:07
  Speaker 2: the twenty twenty four to twenty twenty five tax year,
• 16:10
  Speaker 2: you're actually only paying thirty cents in the dollar. Oh
• 16:12
  Speaker 2: that's nice, which is nice. You've got a little bit
• 16:14
  Speaker 2: of a tax. Yeah, that's good. We love to see it.
• 16:16
  Speaker 2: So just correcting myself, it wouldn't be three to twenty
• 16:18
  Speaker 2: or to be three hundred.
• 16:19
  Speaker 4: Okay, gotcha.
• 16:20
  Speaker 2: Sorry, you know when you're just like, I'm a really
• 16:21
  Speaker 2: hold on, totally chick myself before I wreck myself.
• 16:25
  Speaker 4: Absolutely, that number is still stuck in my head.
• 16:27
  Speaker 2: Yeah, thirty two and a half stent. I feel like
• 16:28
  Speaker 2: I've been saying it for literally years. I need to
• 16:31
  Speaker 2: like recorrect the marginal tax rate chart that lives in
• 16:34
  Speaker 2: my brain right, bit.
• 16:36
  Speaker 4: Hard, But there's so many numbers. It's fair enough. Okay,
• 16:39
  Speaker 4: So the trust doesn't paid tax. No, say, like there
• 16:42
  Speaker 4: are five beneficiaries, and so that one thousand dollar profit
• 16:46
  Speaker 4: is equally distributed to regardless of who owns the asset.
• 16:50
  Speaker 2: Well it could be. So that's where it gets a
• 16:52
  Speaker 2: little bit thickle. Right. So, and I'm not saying that
• 16:55
  Speaker 2: this is good, but I've seen it a lot. Say,
• 16:58
  Speaker 2: you've got sibling, And your sibling's nineteen and they have
• 17:04
  Speaker 2: their first job. But they're not working very hard because obviously,
• 17:07
  Speaker 2: if they've got a family trust, they're from a really
• 17:09
  Speaker 2: wealthy family. No that's not true, but you know what
• 17:11
  Speaker 2: I mean. Oh yeah, but they're not working that much.
• 17:13
  Speaker 2: So they actually just did a few casual shifts. They
• 17:15
  Speaker 2: earned twelve thousand dollars this year, Beck, Because they just
• 17:18
  Speaker 2: earnt about a grand a month doing some casual cafe
• 17:21
  Speaker 2: work on a Sunday. Their marginal tax rate is actually
• 17:25
  Speaker 2: nothing because the first eighteen thy two hundred dollars Beck
• 17:29
  Speaker 2: that everyone in Australia earns is actually tax at zero dollars,
• 17:33
  Speaker 2: so no tax at all. So if your eighteen year
• 17:36
  Speaker 2: old sibling earned twelve grand, they've got a bit of
• 17:39
  Speaker 2: buffer before they hit that eighteen thousand, two hundred dollar limit.
• 17:43
  Speaker 2: So if there's five of you and you're on a
• 17:45
  Speaker 2: marginal tax rate of thirty cents in the dollar, your trustee,
• 17:50
  Speaker 2: who's the person who makes all the decisions, might sit
• 17:52
  Speaker 2: down and be like, Beck, what's your marginal tax rate?
• 17:54
  Speaker 2: Thirty cents? Okay, Well, to make the most of this
• 17:57
  Speaker 2: money this year, we're going to distribute the whole amount
• 18:00
  Speaker 2: to your little sister because they're not going to pay
• 18:03
  Speaker 2: any tax if we distribute it, but we would lose
• 18:06
  Speaker 2: thirty percent if we gave it to you, Beck. Yeah,
• 18:09
  Speaker 2: so they might make decisions like that. I'm not saying
• 18:12
  Speaker 2: that it's fair and reasonable like that all comes into
• 18:14
  Speaker 2: how family wealth works, but families might choose to distribute
• 18:19
  Speaker 2: to the person on the lowest tax bracket. So one
• 18:22
  Speaker 2: of the biggest perks of a family trust is that
• 18:26
  Speaker 2: it's flexible, and the flexibility that you get when it
• 18:29
  Speaker 2: comes to tax planning is a family unit. So unlike
• 18:33
  Speaker 2: other structures, a family trust actually lets you allocate income
• 18:37
  Speaker 2: to different family members based on the individual tax situation. Right, Okay,
• 18:41
  Speaker 2: n't sit down and be like, Okay, Beck's income means
• 18:44
  Speaker 2: she pays thirty cents in the dollar. You know, your
• 18:46
  Speaker 2: mom might be really rich, has big dog job, and
• 18:48
  Speaker 2: he's earning more than one hundred and ninety thousand dollars,
• 18:51
  Speaker 2: so he's paying forty five cents, So it doesn't make
• 18:53
  Speaker 2: a lot of sense to distribute to your dad. But
• 18:57
  Speaker 2: your mum, she doesn't work, Okay, being very stereotypical, Yes,
• 19:01
  Speaker 2: just to paint a picture, right, Like, I'm definitely not
• 19:04
  Speaker 2: saying that this is the norm, but it does paint
• 19:06
  Speaker 2: a very clear picture of how this works. Right, So
• 19:10
  Speaker 2: your mum, she doesn't work. So if one person in
• 19:12
  Speaker 2: your family is on a lower tax bracket, like a
• 19:14
  Speaker 2: stay at home parent or partner, or a UNI student
• 19:17
  Speaker 2: or maybe a retired parent, you could direct most of
• 19:20
  Speaker 2: the trust's income to them, which then reduces your overall
• 19:24
  Speaker 2: tax bill for the family. So like, if I distributed
• 19:27
  Speaker 2: that one thousand dollars to the dad, we're losing forty
• 19:30
  Speaker 2: five percent of it. But if mom, who hasn't worked
• 19:33
  Speaker 2: this year, gets the whole thousand dollars, and you know,
• 19:37
  Speaker 2: as a family, we then manage our cash float together.
• 19:41
  Speaker 2: That's the most tax effective decision for my family because
• 19:44
  Speaker 2: you know, maybe what's mine is yours and what's yours
• 19:47
  Speaker 2: is mine, and we actually have joint finances. But if
• 19:49
  Speaker 2: it's distributed to the mom and we claim it on
• 19:51
  Speaker 2: her tax, we're in the most financially beneficial position, right,
• 19:55
  Speaker 2: And it's a very strategic way to manage income and
• 19:59
  Speaker 2: make sure less of it ends up going into the
• 20:01
  Speaker 2: hands of the tax man. Yeah, very fat I'm not
• 20:03
  Speaker 2: saying that we're trying to be evasive of tax, right,
• 20:07
  Speaker 2: and there are lots of rules that have been put
• 20:09
  Speaker 2: in place to make sure that tax evasion can't happen.
• 20:12
  Speaker 2: But the key is here. The trustee has to distribute
• 20:17
  Speaker 2: every single dollar of the profit at the end of
• 20:20
  Speaker 2: the financial year. Can't just build up in the trust.
• 20:23
  Speaker 2: You can't just make keeps the money in the trust.
• 20:25
  Speaker 2: So that thousand dollars that we made, if you don't
• 20:28
  Speaker 2: allocate that out to your beneficiaries, you can leave it
• 20:32
  Speaker 2: in the trust if you want, but you will be
• 20:35
  Speaker 2: paying forty five cents tax, so you will be paid
• 20:39
  Speaker 2: for the most. So like in this situation where we've
• 20:41
  Speaker 2: got beck on thirty percent, you've got that younger sibling
• 20:44
  Speaker 2: that earns basically not much, and then you've got you know,
• 20:47
  Speaker 2: mum who doesn't work. Doesn't make sense to leave the
• 20:50
  Speaker 2: money in the trust. Yeah, no, no, okay, so we
• 20:53
  Speaker 2: distribute it.
• 20:54
  Speaker 4: Yeah. I just want to quickly check that the profits
• 20:57
  Speaker 4: are definitely different to like, say you've added a for
• 21:00
  Speaker 4: one hundred thousand dollars in assets. Yes, one hundred and
• 21:03
  Speaker 4: it's very different, yes.
• 21:04
  Speaker 2: Understood, Okay, It's like it's like putting money into your
• 21:07
  Speaker 2: savings account. The ater is not going to be like, oh, Beck,
• 21:10
  Speaker 2: has you know another thousand dollars in a savings account?
• 21:12
  Speaker 2: Will tax her on that? Like they know it's post
• 21:14
  Speaker 2: tax income. Yes, okay, got you?
• 21:16
  Speaker 4: Okay, So the trust doesn't pay tax, but the beneficiaries due.
• 21:21
  Speaker 4: So would families not just give all their income to
• 21:24
  Speaker 4: the young kids?
• 21:26
  Speaker 2: Like that makes sense?
• 21:27
  Speaker 5: Right?
• 21:27
  Speaker 1: Yeah?
• 21:27
  Speaker 2: And do you know why I picked the nineteen year
• 21:30
  Speaker 2: old example because they're over the age of eighteen. Yes,
• 21:34
  Speaker 2: because I was hoping that we would get to this topic.
• 21:37
  Speaker 2: But similarly to the way that we've spoken about investing
• 21:40
  Speaker 2: for kids, which we've done episodes on you can find
• 21:42
  Speaker 2: them by looking up, She's on the money investing for kids.
• 21:46
  Speaker 2: When people are underage, different tax rates apply. So if
• 21:49
  Speaker 2: you gave all of your income from a family trust
• 21:52
  Speaker 2: to your kids, and thought, great, that makes sense because
• 21:55
  Speaker 2: you know, little Johnny he's only fifteen or he's only five,
• 22:00
  Speaker 2: I can distribute all the income from my trust to
• 22:02
  Speaker 2: him because he didn't have any taxable income. And you
• 22:04
  Speaker 2: think that's a really good idea. The government's like, what, Beck,
• 22:07
  Speaker 2: we already thought of this, because we're not going to
• 22:10
  Speaker 2: let you if a tax you can use your wife.
• 22:12
  Speaker 2: You can use your husband if they you know, a
• 22:15
  Speaker 2: stay at home parents. Sure, that's the line we're going
• 22:18
  Speaker 2: to draw. Sure you try to use your kids. The
• 22:21
  Speaker 2: ATO actually has a very strict rule on miners. Kids
• 22:25
  Speaker 2: under the age of eighteen only have a tax free
• 22:28
  Speaker 2: threshold of get this, four hundred and sixteen dollars a
• 22:31
  Speaker 2: year for income distributed from a trust. Wow, so that
• 22:35
  Speaker 2: thousand dollars isn't going to go that far, is it?
• 22:37
  Speaker 4: No? True?
• 22:38
  Speaker 2: No, anything above that is taxed at the top marginal
• 22:41
  Speaker 2: tax rate of forty five cents.
• 22:42
  Speaker 4: Oh that's unfair. What a these little kids exactly trying
• 22:46
  Speaker 4: to make it money.
• 22:47
  Speaker 2: So you might go, all right, well, I think kids
• 22:49
  Speaker 2: aren't going to wear a Maybe do need to get
• 22:51
  Speaker 2: a wife after that?
• 22:52
  Speaker 3: Yeah?
• 22:52
  Speaker 4: Okay, okay, So I want to know, like the reason
• 22:55
  Speaker 4: is to start up a trust because I'm thinking, if
• 22:57
  Speaker 4: you like, you're already paying tax on it. Okay, So
• 23:00
  Speaker 4: again one of the reasons the set up a trust,
• 23:01
  Speaker 4: let's start with that.
• 23:02
  Speaker 2: Okay. So asset protection is the number one reason people
• 23:05
  Speaker 2: set up a trust. Assets in a trust they're not
• 23:08
  Speaker 2: technically yours anymore. So like the basketball example, I gave before.
• 23:13
  Speaker 2: We had a bucket over there, and I asked you
• 23:14
  Speaker 2: to put your basketball in the bucket. Technically, you know
• 23:17
  Speaker 2: that's still your basketball. Yeah, I'm not going to withhold
• 23:20
  Speaker 2: the basketball from you, and you know, have an argument
• 23:22
  Speaker 2: over the fact that someone else owns it. Someone else
• 23:24
  Speaker 2: doesn't own it, but it's now protected. It's in the bucket.
• 23:27
  Speaker 2: Let's pretend it's a magic bucket. Yeah, no one can
• 23:29
  Speaker 2: take it off you. If I like came over to you,
• 23:32
  Speaker 2: sniffed around, was like, do you have a basketball? Looked
• 23:34
  Speaker 2: up your top. Can't see a basketball that does not
• 23:37
  Speaker 2: have a basketball. They're protected. Beck, let's be dramatic. If
• 23:41
  Speaker 2: ever you got sued, if ever you filed for bankruptcy,
• 23:45
  Speaker 2: or you went through a really messy divorce and a
• 23:47
  Speaker 2: lawyer was sniffing around, being like, she got a basketball.
• 23:50
  Speaker 2: I want to see if I can take her basketball
• 23:51
  Speaker 2: off her and give it to her ex wife. Yeah,
• 23:54
  Speaker 2: they can't see it.
• 23:55
  Speaker 4: They can't see it.
• 23:56
  Speaker 2: It's not theirs. I mean, in a court of law,
• 23:58
  Speaker 2: you will have to declare your trust in the sets
• 24:00
  Speaker 2: in your trust. But if you're being sued or if
• 24:02
  Speaker 2: you go bankrupt, like, it is definitely a protected asset.
• 24:06
  Speaker 4: Okay.
• 24:07
  Speaker 2: The second thing there is, a trust is very handy
• 24:10
  Speaker 2: if you're planning on passing wells down to your children
• 24:14
  Speaker 2: okay even their kids in the future. So it actually
• 24:18
  Speaker 2: lets you control exactly how and when your assets are distributed.
• 24:22
  Speaker 2: So you remember before I was telling you about a
• 24:23
  Speaker 2: trusteed just staying out the rule book. So a good
• 24:26
  Speaker 2: example here is instead of I guess, handing everything over
• 24:29
  Speaker 2: in a big chunk and being like, you could have
• 24:31
  Speaker 2: all of my stuff back, you could set it up
• 24:34
  Speaker 2: so that your kids get access to money when they
• 24:36
  Speaker 2: hit certain milestones, so that when they turn eighteen or
• 24:40
  Speaker 2: they turn twenty five and they're buying their first home.
• 24:42
  Speaker 2: It's all about making sure that your hard earned assets
• 24:45
  Speaker 2: stay in the family and are used in a way
• 24:48
  Speaker 2: that you would want them to be. And that's where
• 24:50
  Speaker 2: you get to create the rules. And I think that
• 24:52
  Speaker 2: that's really fun.
• 24:54
  Speaker 4: Okay. Is there any other reason?
• 24:56
  Speaker 2: Yep, So there's a couple. So okay, there's another big
• 24:59
  Speaker 2: one protecting against family disputes. So a trust can actually
• 25:04
  Speaker 2: avoid arguments over things like inheritances or assets because beck,
• 25:09
  Speaker 2: let's face it, stuff gets so messy when more money
• 25:12
  Speaker 2: is involved. More money, more problems literally, you know how
• 25:16
  Speaker 2: we're talking about the Mahogany table and the family talking
• 25:19
  Speaker 2: about their trustee. We all know that that situation often
• 25:23
  Speaker 2: arises when you know, and I'm not trying to be
• 25:26
  Speaker 2: rude here, but a death in the family happens, they're
• 25:29
  Speaker 2: all fighting over the will and disputing the will and
• 25:31
  Speaker 2: being like, no, that's not what Beck would want. Oh
• 25:33
  Speaker 2: my god, Beck's husband was cheating on here in this
• 25:36
  Speaker 2: and that. Do you know what I mean against real dramatic,
• 25:38
  Speaker 2: real quick, especially when lots of money is involved. Like,
• 25:41
  Speaker 2: it's actually insane how messy these things can become. But
• 25:47
  Speaker 2: a trusteed that's not a will that's set up much before.
• 25:52
  Speaker 2: That's a full document that is often not able to
• 25:55
  Speaker 2: be contested in the same way that you could be like,
• 25:58
  Speaker 2: I'm going to contest that will, So a trusteed it
• 26:01
  Speaker 2: lays out everything and there's actually no room for confusion
• 26:05
  Speaker 2: or arguments over who gets what. That's clever, and it
• 26:08
  Speaker 2: can be annoying, like and I'm not saying that all
• 26:11
  Speaker 2: of these things are you know, perfect, and the trust
• 26:14
  Speaker 2: needs set up and then no one argues Like I
• 26:16
  Speaker 2: have sat in many a family meeting, not my family
• 26:19
  Speaker 2: where the great grandparents have set something up and it
• 26:22
  Speaker 2: no longer works for today. You know, they might not
• 26:25
  Speaker 2: be able to access their trust distribution until they're married.
• 26:28
  Speaker 2: And I mean, if that was set up in the
• 26:30
  Speaker 2: nineteen sixties, you might go, okay, like that kind of
• 26:33
  Speaker 2: makes sense because little Johnny's gonna get married. Johnny might
• 26:37
  Speaker 2: not want to get married in twenty twenty five, and
• 26:39
  Speaker 2: that is very normal now. So sometimes it does cause friction.
• 26:43
  Speaker 2: And then the last thing I want to say is
• 26:45
  Speaker 2: trusts can also have massive benefits if you're running a
• 26:48
  Speaker 2: small business. They can hold your business assets, they can
• 26:51
  Speaker 2: protect you from personal liabilities, and they can allow profits
• 26:55
  Speaker 2: to be distributed to family members in a way that
• 26:57
  Speaker 2: is tax effective. And my friend, that is why I
• 27:00
  Speaker 2: have a family trust. I say, it's not heaps in
• 27:02
  Speaker 2: it right now. But my businesses are not owned by me.
• 27:06
  Speaker 2: They are owned by my trust. Ah, and I am
• 27:09
  Speaker 2: the beneficiary of my trust.
• 27:11
  Speaker 4: I see soul beneficiary.
• 27:13
  Speaker 2: I am the sole beneficiary trust God. Yeah, And that
• 27:16
  Speaker 2: was set up so that I can protect myself so
• 27:18
  Speaker 2: that if anything goes wrong, I go bankrupt, if I
• 27:21
  Speaker 2: get sued, she's on the money is protected. If I
• 27:23
  Speaker 2: go through a messy divorce with Steve, which I hope
• 27:25
  Speaker 2: never happens, because I do genuinely think that even if
• 27:28
  Speaker 2: that happened, we're kind of on the same page. Yes,
• 27:31
  Speaker 2: but I am protected in a way that makes sense.
• 27:34
  Speaker 2: He's not a beneficiary on my trust if you want
• 27:36
  Speaker 2: to know, because it doesn't make sense for him to
• 27:38
  Speaker 2: be a beneficiary on my trust. Yeah, he has his
• 27:40
  Speaker 2: own full time income. I can't distribute income to him. Yeah,
• 27:46
  Speaker 2: in a way that would make sense. And just really quickly,
• 27:48
  Speaker 2: if you're like going through a divorce, you know how
• 27:49
  Speaker 2: sometimes people are like, oh, you can take half of
• 27:51
  Speaker 2: whatever if something's in a trust, like they can't. So
• 27:54
  Speaker 2: this is where it gets a little bit tricky sticky, right,
• 27:57
  Speaker 2: It depends when the trust was established.
• 27:59
  Speaker 4: I see.
• 28:00
  Speaker 2: So if the trust was established prior to you getting
• 28:03
  Speaker 2: into that relationship to marital assets. I'm not a lawyer.
• 28:09
  Speaker 2: You need to talk to your lawyer. This is just
• 28:10
  Speaker 2: how I've seen it fall out for previous clients of mine.
• 28:14
  Speaker 2: But if you established that trust, well in a relationship,
• 28:17
  Speaker 2: it could be contested regardless of your magadas And I mean, okay,
• 28:20
  Speaker 2: it depends like if you're in a good, solid relationship,
• 28:23
  Speaker 2: maybe you've decided to establish a family trust together, Like
• 28:26
  Speaker 2: you might not just be protecting assets from your partner,
• 28:29
  Speaker 2: but it's also a way that I have used historically
• 28:34
  Speaker 2: for my personal financial advice clients when I had them
• 28:38
  Speaker 2: to protect their assets. So good example of that young
• 28:42
  Speaker 2: girl client gets a very big inheritance from a grandmother
• 28:47
  Speaker 2: that passed away, talking about a couple of million dollars.
• 28:50
  Speaker 2: She was really worried about how that might come into
• 28:53
  Speaker 2: play if she met someone, got a boyfriend, got a partner,
• 28:56
  Speaker 2: if it was just sitting in her bank account, or
• 28:58
  Speaker 2: these shares were just in her personal name. So she
• 29:01
  Speaker 2: was single at the time she came to me. We
• 29:03
  Speaker 2: did a whole heap of tax planning with her accountant,
• 29:06
  Speaker 2: with me, We set up a family trust. We got
• 29:09
  Speaker 2: all of that established so that if ever she got
• 29:12
  Speaker 2: into a relationship, that wouldn't come into play. Yeah, so
• 29:16
  Speaker 2: we could say no, sorry, like that's in a family trust.
• 29:19
  Speaker 2: It's actually locked and loaded away from you. You can't
• 29:21
  Speaker 2: get half of her inheritance if you break up with her.
• 29:23
  Speaker 4: Wow, that's actually very good.
• 29:25
  Speaker 2: Right, And I feel like sometimes we need those tangible
• 29:27
  Speaker 2: examples to go. Yeah, asset protection what does that even mean? Beck, Like,
• 29:31
  Speaker 2: what is asset protection? No one gets into a relationship
• 29:34
  Speaker 2: being like I adore this person, can't wait for them
• 29:37
  Speaker 2: to screw me over later, Yes, like no one does that. No,
• 29:40
  Speaker 2: but like plan for the worst, expect the best. Exactly,
• 29:43
  Speaker 2: you just got to be safe. And it doesn't mean
• 29:45
  Speaker 2: it doesn't mean that you think the person's dodgy. It's
• 29:47
  Speaker 2: just you know, you're thinking about yourself. So exactly what
• 29:51
  Speaker 2: are the cons in this case? So there are obviously
• 29:54
  Speaker 2: a few, and it's not all sunshine and roses. When
• 29:56
  Speaker 2: it comes to a family trust, you do have to
• 29:58
  Speaker 2: really think about whether you want one. Some people want
• 30:01
  Speaker 2: them because they're planning on creating wealth. So I've had
• 30:06
  Speaker 2: clients set them up who have regular jobs, like one
• 30:11
  Speaker 2: seventy grand, the other earn one hundred grand, Like I
• 30:14
  Speaker 2: would say, that's a relatively regular income for a family,
• 30:18
  Speaker 2: And they set it up because their intention was to
• 30:21
  Speaker 2: aggressively invest to retire early. And they were like, actually,
• 30:24
  Speaker 2: we want to create this into family wealth. We're really
• 30:27
  Speaker 2: committed to this plan, and we want to set up
• 30:29
  Speaker 2: a trust so that when we start investing, we're starting
• 30:33
  Speaker 2: to invest inside that trust for our set protection reasons.
• 30:37
  Speaker 2: We're happy with all the fees and charges because literally
• 30:39
  Speaker 2: we're sending like sixty percent of our income to these shares,
• 30:43
  Speaker 2: and we don't want to have to transfer the shares
• 30:46
  Speaker 2: once they're established into a trust, because if you transfer
• 30:50
  Speaker 2: something usually you will have to pay stamp duty, so
• 30:53
  Speaker 2: you'll have to pay some taxes or you have to
• 30:56
  Speaker 2: pay some amounts that would be too much, So they'd
• 30:58
  Speaker 2: thought about it. That was their plans, but set up
• 31:01
  Speaker 2: costs a lot above and beyond the financial advice you
• 31:05
  Speaker 2: might need to get. It can cost anywhere between one
• 31:08
  Speaker 2: thousand and five thousand dollars to set up a family trust,
• 31:11
  Speaker 2: plus then annual admin fees and accounting fees, which I
• 31:15
  Speaker 2: would say on average range between one thousand and three
• 31:17
  Speaker 2: thousand dollars a year. So it's definitely not an option
• 31:21
  Speaker 2: that you go, oh, just set it up, one and done.
• 31:24
  Speaker 2: Like there's ongoing admin costs and expectations.
• 31:28
  Speaker 4: I see that's where the rich family.
• 31:30
  Speaker 2: Yeah, that's why they're usually reserved for the wealthier because like,
• 31:34
  Speaker 2: let's be honest, who is spending three thousand dollars a
• 31:37
  Speaker 2: year on an asset if it doesn't super financially benefit you. Yeah,
• 31:41
  Speaker 2: they're a bit complex. So family trusts sign exactly like
• 31:45
  Speaker 2: a little DIY option. You do need an accountant or
• 31:48
  Speaker 2: a lawyer to help you manage it long term, and
• 31:51
  Speaker 2: there are relatively strict rules to follow, so you can't
• 31:54
  Speaker 2: dip in and dip out, like it's not like a
• 31:55
  Speaker 2: savings account. Over to the side, and then I would say,
• 31:59
  Speaker 2: eighty eero scrutiny like tax man is all over it,
• 32:03
  Speaker 2: like the tax office is all over family trusts to
• 32:07
  Speaker 2: make sure that they're not being used for tax dodging.
• 32:10
  Speaker 2: Oh like, because people might set them up and be like, oh,
• 32:13
  Speaker 2: this is so smart, I'm going to distribute it. They
• 32:16
  Speaker 2: aren't silly, and with the rise of like data matching,
• 32:20
  Speaker 2: they're getting better at calling out like that's a dodgy
• 32:22
  Speaker 2: family trust. Happens all the time, so you do have
• 32:25
  Speaker 2: to play by the rules. It's not like, oh, set
• 32:28
  Speaker 2: this up and you could be a little bit sneaky,
• 32:29
  Speaker 2: No sir, that's not going to happen.
• 32:31
  Speaker 4: No. So if you say, for example, have like three
• 32:33
  Speaker 4: thousand dollars, like you go to this thirty I don't
• 32:35
  Speaker 4: know why, I don't know. I pulled that out to
• 32:37
  Speaker 4: shares and then each year you have a thousand dollars profit. Yeah,
• 32:40
  Speaker 4: can you put that thousand dollars profit just back into
• 32:43
  Speaker 4: the shares in your.
• 32:44
  Speaker 2: You could, but there might be a roundabout way of
• 32:46
  Speaker 2: going about it. So again, I'm not an accountant or like,
• 32:49
  Speaker 2: let's say you left it in the account and said
• 32:52
  Speaker 2: I just want it to be reinvested. It will be
• 32:54
  Speaker 2: taxed at forty five years. The profit will be taxed
• 32:56
  Speaker 2: at for a profit will be Yeah, I might say that, Beck,
• 33:00
  Speaker 2: you pay thirty cents tax, so let's distribute it to you. Yeah,
• 33:03
  Speaker 2: So I'm going to put the money into your account,
• 33:05
  Speaker 2: We're going to do your tax return, we're going to
• 33:06
  Speaker 2: declare the money. Then we're going to put some of
• 33:09
  Speaker 2: that money back into the trust. Okay, that would make
• 33:11
  Speaker 2: sense because I'm like, you're struggling to know why that
• 33:13
  Speaker 2: would be beneficial if all the money are earning on shares.
• 33:16
  Speaker 2: You know, But are there any times where like it
• 33:20
  Speaker 2: might actually not be worth it, like when it's not
• 33:23
  Speaker 2: like a one size fits all approach. Yeah, Okay, it's
• 33:26
  Speaker 2: definitely not. So I would say that family trusts aren't
• 33:29
  Speaker 2: a good plan if you're just starting out your finance journey.
• 33:32
  Speaker 2: Like if you're just on the start of your journey
• 33:34
  Speaker 2: or you don't have heaps of assets, Like I would
• 33:37
  Speaker 2: just be like, there is literally no point, and I
• 33:41
  Speaker 2: mean that not in an offensive way. Just why would
• 33:44
  Speaker 2: you spend the money? Yeah, Like it's a waste of
• 33:46
  Speaker 2: money because if the setup costs and the admin costs
• 33:50
  Speaker 2: outweigh the benefits, like for example, there's low or no
• 33:54
  Speaker 2: income generating assets and no need for tax planning, like
• 33:58
  Speaker 2: why would you do it? And then for people with
• 34:00
  Speaker 2: relatively simple financial situations, so I guess those without kids
• 34:05
  Speaker 2: or dependents at all or major assets, like, there's likely
• 34:09
  Speaker 2: easier ways to manage your money. Yeah, Like it does
• 34:12
  Speaker 2: get a little bit complex. Do you want to go
• 34:14
  Speaker 2: through a couple of situations? Yeah, Placulate examples are the
• 34:17
  Speaker 2: best way to learn. So let's say single, young professional.
• 34:22
  Speaker 2: Let's pretend beck single, you don't have a lot of
• 34:25
  Speaker 2: investments yet, it's probably not worth it yet. I would
• 34:28
  Speaker 2: say focus on building some wealth first. You're a small
• 34:31
  Speaker 2: business owner, like you've just started your own business, but
• 34:35
  Speaker 2: you're planning on making some bigger profits, Like you're not
• 34:37
  Speaker 2: planning on just you know, doing some local markets and
• 34:40
  Speaker 2: calling it a day. There, like you're planning on, like
• 34:42
  Speaker 2: scaling this business at some point could potentially be worth it,
• 34:46
  Speaker 2: because I would say protecting those assets is really smart,
• 34:50
  Speaker 2: and then distributing the profits to you could be helpful. Yeah,
• 34:54
  Speaker 2: let's say you've had a couple of kids beck with Jess,
• 34:56
  Speaker 2: and then you break up sorry, and then you meet
• 34:59
  Speaker 2: someone else and they kids and you've become a blended
• 35:02
  Speaker 2: family cute before you broke up with Jess, like you
• 35:05
  Speaker 2: built some wealth with her. Could be really good for
• 35:07
  Speaker 2: protecting your assets.
• 35:08
  Speaker 4: Yep.
• 35:08
  Speaker 2: What about like parents with adult kids, It could be
• 35:13
  Speaker 2: really good for parents with adult kids to set up
• 35:18
  Speaker 2: a trust so that they can distribute wealth to their
• 35:20
  Speaker 2: kids before an inheritance happens. A lot of people who
• 35:23
  Speaker 2: have wealth are now looking at it in wanting to
• 35:28
  Speaker 2: see that wealth spent by the younger generation instead of
• 35:31
  Speaker 2: waiting until they're dead. Yeah, and they're kind of like, ah, Beck,
• 35:34
  Speaker 2: I would actually like to see you purchase your first time.
• 35:36
  Speaker 2: I would actually like to see you, you know, be
• 35:38
  Speaker 2: able to set your kids up instead of waiting for
• 35:41
  Speaker 2: me to die and then getting access to an inheritance.
• 35:43
  Speaker 2: That's a good way to do it. And then like
• 35:45
  Speaker 2: maybe a couple with minimal assets, I would probably say
• 35:49
  Speaker 2: it might not be worth the cost unless they have
• 35:52
  Speaker 2: heaps more to protect. Okay, so I feel like the
• 35:56
  Speaker 2: best thing you can do is probably talk to a
• 35:57
  Speaker 2: finance professional.
• 35:59
  Speaker 4: Yes, I see. So let's say someone's listened to this
• 36:01
  Speaker 4: full episode and Things of Trust actually might be a
• 36:03
  Speaker 4: good idea for the situation. What's the first step? Like,
• 36:06
  Speaker 4: how do you actually get started? How do you set
• 36:08
  Speaker 4: up a trust? How do you set up a trust?
• 36:10
  Speaker 2: You talk to your accountant. You can also speak to
• 36:12
  Speaker 2: a financial advisor. And the first thing I want you
• 36:14
  Speaker 2: to do is not just say I want to trust,
• 36:17
  Speaker 2: but can you just tell me if it's worth it
• 36:18
  Speaker 2: for me? Like can you do a pros and cons
• 36:20
  Speaker 2: list for me? Personally? Any good accountant will be like
• 36:23
  Speaker 2: say less Beck, come in for a coffee and we'll
• 36:25
  Speaker 2: do a pros and cons list on the table, and
• 36:27
  Speaker 2: like put your personal situation right in there, like listening
• 36:30
  Speaker 2: to a podcast. Great for base level education, great for
• 36:34
  Speaker 2: understanding the concept. I cannot tell you what the right
• 36:37
  Speaker 2: situation is for you, but an accountant can. Yes, financial
• 36:40
  Speaker 2: advisor could do the same thing. If you decide to
• 36:43
  Speaker 2: set up a trust, it's very simple. But it's also
• 36:46
  Speaker 2: a lot of signatures. There's a lot of paperwork, and
• 36:50
  Speaker 2: that's fine. I used to actually hate setting up trusts
• 36:52
  Speaker 2: for clients because we're talking eighty plus pages of a
• 36:55
  Speaker 2: trusteed that you need to print or get signed, have
• 36:58
  Speaker 2: them initial so many different Like, it's just an ad
• 37:01
  Speaker 2: midnightmare for me, not for you. If you're the client, beg,
• 37:04
  Speaker 2: I do all of the printing, I do all of
• 37:06
  Speaker 2: the scanning. I organize that and I put those little
• 37:08
  Speaker 2: sticky labels on that say sign here, and then I
• 37:11
  Speaker 2: give you a coffee and be like, hope your pen's ready,
• 37:13
  Speaker 2: and then you have to sign a heap of times. Okay,
• 37:15
  Speaker 2: it's fine, but the accountant will set that up. They'll
• 37:18
  Speaker 2: register it with the ATO and set it up in
• 37:21
  Speaker 2: the same way that they would have business. So you
• 37:22
  Speaker 2: need to name your trust. So one piece of advice
• 37:26
  Speaker 2: I have is that if you are ever setting up
• 37:28
  Speaker 2: a family trust, never use your name. Oh so I
• 37:32
  Speaker 2: would never say becksiy Ed's family trust. Okay, Like, if
• 37:34
  Speaker 2: you're telling me that it's for asset protection and you
• 37:37
  Speaker 2: don't want people to find it, don't put on your name. Yeah,
• 37:40
  Speaker 2: you can call it anything, though, and I won't tell
• 37:43
  Speaker 2: you what my client's trust names were, but like there
• 37:47
  Speaker 2: were some funny ones.
• 37:48
  Speaker 4: Yeah, okay, Like I had a.
• 37:50
  Speaker 2: Client and it was similar but not this name, but
• 37:52
  Speaker 2: it was like they were a very conservative investor and
• 37:55
  Speaker 2: they called their trust money for bitcoin and it was
• 37:58
  Speaker 2: very funny. Yeah, So things like you can name it anything,
• 38:01
  Speaker 2: just please don't use your name, like you want to
• 38:05
  Speaker 2: separate it from you. Yea, that doesn't mean you don't
• 38:08
  Speaker 2: own it, but like anything, name it a past pet,
• 38:12
  Speaker 2: name it like the name of the street that you
• 38:14
  Speaker 2: grew up on. I don't care. Just don't make it
• 38:16
  Speaker 2: your family name. And when you're choosing your trust name,
• 38:19
  Speaker 2: you'll also choose a trustee, so it might be a
• 38:22
  Speaker 2: company or it might be an individual, and then you're
• 38:25
  Speaker 2: also going to pick all your beneficiaries. The trusteed needs
• 38:28
  Speaker 2: to be drafted by a lawyer. There are places that
• 38:31
  Speaker 2: do them automatically, so like there are actual trusteed lawyers
• 38:34
  Speaker 2: that basically have a cut paste trusteed. If you want
• 38:37
  Speaker 2: the bare minimum, you can get that. I think we
• 38:39
  Speaker 2: used to pay like four hundred bucks for a trusteed
• 38:41
  Speaker 2: from one of these companies. But if you want any
• 38:43
  Speaker 2: bells and whistles. You need to sit down with an
• 38:46
  Speaker 2: individual lawyer to get that written up, and then you
• 38:49
  Speaker 2: just need to pay all of the setup costs and
• 38:51
  Speaker 2: register and sign all of your names away and whatnot.
• 38:53
  Speaker 2: And then you might also, you know, open a bank account,
• 38:57
  Speaker 2: but you can't open a bank account until the trust
• 38:59
  Speaker 2: is set up because the quote trust will set up
• 39:01
  Speaker 2: a bank account if you want to own money. I see, Okay,
• 39:04
  Speaker 2: does that makes sense? So it has to exist to
• 39:06
  Speaker 2: be able to set up a bank account.
• 39:08
  Speaker 4: I see here I'm catching myself thinking like, ooh, this
• 39:10
  Speaker 4: is not accessible for everyone. But I'm like, oh, if
• 39:12
  Speaker 4: I can't afford it, I probably don't want a family
• 39:14
  Speaker 4: trust or a trust station.
• 39:16
  Speaker 2: So we don't want to be spending money unnecessarily.
• 39:18
  Speaker 4: Yes, I see. So what about if you have investments
• 39:22
  Speaker 4: but you don't want the hassle of a family trust?
• 39:24
  Speaker 1: Now?
• 39:24
  Speaker 4: Can you transfer these things into the trust later? Yes?
• 39:27
  Speaker 2: You can, but again there's so many butts in this episode.
• 39:32
  Speaker 2: You can transfer assets, like you could transfer property or
• 39:36
  Speaker 2: shares into a family trust that's already been set up,
• 39:40
  Speaker 2: but you want to consider a few things before you do.
• 39:42
  Speaker 2: So you're going to need to transfer the ownership to
• 39:45
  Speaker 2: move them into the trust. And if you know you
• 39:47
  Speaker 2: want to hold these assets in a trust, it can
• 39:50
  Speaker 2: generally be better to purchase them directly through the trust
• 39:53
  Speaker 2: from the outset. And this is going to avoid stamp
• 39:56
  Speaker 2: duty and tax because you know how I said before
• 39:58
  Speaker 2: that the trust is seen in the eye of the
• 40:00
  Speaker 2: ATOS an individual. If you're transferring a property from Beck
• 40:05
  Speaker 2: to Beck's trust, the ATO is going to see that
• 40:08
  Speaker 2: as another individual buying it.
• 40:10
  Speaker 1: Yeah.
• 40:10
  Speaker 2: See, so if you're transferring it, stamp duty tax payable.
• 40:14
  Speaker 2: If the asset has increased in value, they're going to
• 40:17
  Speaker 2: try and get you on capital gains tax. So you've
• 40:21
  Speaker 2: got a way up whether it's worth it. And I
• 40:23
  Speaker 2: actually had a lot of clients where they would set
• 40:25
  Speaker 2: up a trust and be like I really want to
• 40:26
  Speaker 2: put my property in it, and I'd be like, no, sorry,
• 40:29
  Speaker 2: Like financially that's not viable. Future properties, great, we can
• 40:33
  Speaker 2: put that in the trust, but right now it's not
• 40:36
  Speaker 2: financially viable. And you just told me that you don't
• 40:38
  Speaker 2: want to be in this house forever, So let's just
• 40:40
  Speaker 2: wait until we sell that property, and then we'll never
• 40:42
  Speaker 2: buy one in your personal name again. We'll buy it
• 40:45
  Speaker 2: in the trust, But we're not going to just incur
• 40:47
  Speaker 2: heaps of tax just to change the names and the
• 40:50
  Speaker 2: ownership structure, Like it might not be worth it. But
• 40:54
  Speaker 2: if you set up the trust and then bought the property.
• 40:56
  Speaker 2: So for example, Beck, you've decided you're going to be
• 40:59
  Speaker 2: a property investor, know, I'm going to own heaps of
• 41:01
  Speaker 2: investment properties, you might want to set up a trust
• 41:04
  Speaker 2: first so that they're not in your personal name. They're
• 41:07
  Speaker 2: in your trust from the outset. But you do want
• 41:10
  Speaker 2: to make sure that you're chatting with an expert about
• 41:12
  Speaker 2: transfer costs and workout if it will be worth it,
• 41:15
  Speaker 2: because there were a couple of times where we did
• 41:17
  Speaker 2: do those transfers because it actually ended up being the
• 41:21
  Speaker 2: best thing for the client, Like financially, yeah, it cost
• 41:23
  Speaker 2: them a lot of money, but they got a lot
• 41:25
  Speaker 2: more asset protection, or it put them in a better position,
• 41:28
  Speaker 2: or you know, it might have been a rental property right.
• 41:30
  Speaker 2: So good example of that from way back when is
• 41:34
  Speaker 2: husband owned an investment property, got married, wife was a
• 41:37
  Speaker 2: stay at home wife, but because he owned the investment property,
• 41:41
  Speaker 2: all of that rental income came directly to him under
• 41:44
  Speaker 2: his tax return. By transferring that property into a trust.
• 41:47
  Speaker 2: We could distribute that profit to his wife and she
• 41:52
  Speaker 2: didn't work, so that was financially tax beneficial. And we
• 41:56
  Speaker 2: did this lack cost benefit analysis that yes, there's a
• 41:59
  Speaker 2: lot of up cost to doing this, but over the
• 42:01
  Speaker 2: long term, he had no intention of selling the property
• 42:03
  Speaker 2: and always renting it out. I think it was like
• 42:06
  Speaker 2: after eight years or something, it broke even, and then
• 42:08
  Speaker 2: after ten years it was like making a profit. We
• 42:10
  Speaker 2: did have to kind of take a step back to
• 42:12
  Speaker 2: take a step forward in their wealth creation journey. But
• 42:14
  Speaker 2: you can only work that out if you talk to
• 42:16
  Speaker 2: a professional course.
• 42:17
  Speaker 4: Yes, I mean you can close the trust.
• 42:19
  Speaker 2: You can close the trust if you decide it's not working.
• 42:21
  Speaker 2: Beautiful easy. Okay, we've actually covered so much today. I
• 42:25
  Speaker 2: think the biggest thing I've learned is that family trusts
• 42:27
  Speaker 2: aren't just some exclusive tool for the Mega Ridge. Don't
• 42:32
  Speaker 2: stop making the movies about the Mega Ridge.
• 42:34
  Speaker 4: Yes, Stone, stop making those movies. We need see, you
• 42:37
  Speaker 4: do need a little bit of wealth, probably more than
• 42:38
  Speaker 4: I have right now. But regular families can benefit from
• 42:41
  Speaker 4: them too, but only if it's the right fit for
• 42:44
  Speaker 4: your situation.
• 42:45
  Speaker 2: Yeah, one hundred percent, And I think importantly, And let's
• 42:48
  Speaker 2: leave it on. These family trusts can be a very
• 42:50
  Speaker 2: smart way to manage your assets or reduce some tax
• 42:53
  Speaker 2: or plan for the future, but they're definitely.
• 42:56
  Speaker 4: Not a must have item.
• 42:57
  Speaker 2: I think so many people when they get on too
• 42:59
  Speaker 2: their wealth creation journey or they start listening to the podcast,
• 43:02
  Speaker 2: they're like, I want to do this properly, Like I
• 43:04
  Speaker 2: really want to get my stuff together. I probably should
• 43:07
  Speaker 2: get a family trust because that's legitimate, Like it feels
• 43:09
  Speaker 2: full legit right, might not actually be in your best interests.
• 43:13
  Speaker 2: You don't have to be wealthy to set one up,
• 43:15
  Speaker 2: but you do have to have a very clear reason
• 43:17
  Speaker 2: for doing so.
• 43:19
  Speaker 4: And if you found this episode helpful, please share it
• 43:21
  Speaker 4: with someone else who might be considering a family trust.
• 43:23
  Speaker 2: Just gonna state the obvious. If you got this far
• 43:26
  Speaker 2: into the episode and you're not following us and you
• 43:28
  Speaker 2: haven't subscribed to this podcast, my friend, now is the time,
• 43:32
  Speaker 2: because it genuinely helps us so much to keep creating
• 43:36
  Speaker 2: content that's all about putting you in the best possible
• 43:38
  Speaker 2: financial position.
• 43:40
  Speaker 4: Gorgeous. All right, guys, we'll see you on Friday.
• 43:48
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