Family trusts still offer major wealth management benefits: HLB Mann Judd Sydney

Triple3 fund added to Macquarie Wrap
October 28, 2014
Grandparents step in to fill the education savings gap: Lifeplan
October 31, 2014

Despite recent changes to regulations affecting family trusts, they still provide tremendous flexibility for managing investment portfolios and family wealth, says Michael Hutton, head of wealth management at HLB Mann Judd Sydney.

Michael Hutton

“There is a tendency for family trusts to be overlooked in favour of SMSFs as a way of managing wealth.

“Yet family trusts have a number of advantages over SMSFs that shouldn’t be ignored.”

Mr Hutton said that these include:

  • Asset protection options;
  • Intergenerational wealth transfer;
  • No limit on contributions to the trust, and the ability to increase capital;
  • Income splitting to all family members, giving substantial tax benefits particularly where there are low income earners in the family;
  • No age limits to access funds;
  • Ability to hold personal use assets, such as a holiday home;
  • Ability to run a business through the trust; and
  • Estate planning flexibility.

“In fact, family trusts have far fewer restrictions and rules than SMSFs and are therefore simpler to operate,” he said.

“The reasons people tend to ignore family trusts as a wealth management tool is because it is believed that their benefits have been eroded and they are seen as overly complex and expensive. In reality, they are often simpler and cheaper to operate than SMSFs.

“Indeed, the growth in SMSFs in recent years has been extraordinary – there are currently 534,000 SMSFs in Australia, and perhaps 350,000 family trusts, despite the fact that family trusts have been around for much longer.

“The big attraction of SMSFs in in the tax benefits that superannuation offers as well as the flexibility they give in managing retirement savings, but the benefits of family trusts are also significant.

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

“Basically this makes family trusts an ideal tool for multi-generational wealth transfer while SMSFs, on the other hand, must be wound up on the death of the last member, which can also raise tax issues.

“It also means assets held by an SMSF must be sold, and if the family wishes to keep an asset, such as property, they will be liable for stamp duty and conveyancing costs.”

Mr Hutton added that family trusts should be considered in conjunction with superannuation funds such as SMSFs, as they work well together.

“Those wanting to invest a substantial amount, say more than $300,000, who have either maxed out their contributions to super, or want more accessibility than super provides, may find a family trust worthwhile.

“This is particularly so if there are low-income beneficiaries in the family group to whom taxable distributions can be allocated,” he said.

HLB Mann Judd Sydney is a firm of accountants and business and financial advisers, and part of the HLB Mann Judd Australasian Association.


For more information please contact:

Michael Hutton – Phone: 02 9020 4194

28 October 2014