An eight-step guide to setting up a trust account in Australia

 

A trust account is a bank account used to hold money on behalf of someone else. The money in the account is held for the beneficiary and can only be used. Trust accounts are typically used by lawyers, real estate agents and financial advisers to hold client money. Setting up a trust account is a straightforward process, but there are a few things you need to know before you get started. Here’s a guide to setting up a trust account in Australia.

Choose a trustee

The first step in setting up a trust account is to choose a trustee. The trustee will manage the account and make sure that the money is used for the benefit of the beneficiary. You can choose to be your trustee or appoint someone else to do it for you. If you appoint someone else, they must be over 18 years of age and have no bankruptcies or criminal convictions.

Open an account

You will need to open an account at the bank in the name of the trust. The bank will require personal details and the beneficiary’s name and date of birth. You’ll also need to provide your driver’s licence or passport to prove your identity to acquire an open trust account.

Deposit money into the account

Once you open the account, you’ll need to deposit money. The amount of money you need to deposit will depend on the terms of the trust. For example, if the trust is for a child’s education, you may need to deposit enough to fund their tuition and living expenses.

Prepare trust documents

The next step is to prepare trust documents. These documents will set out the terms of the trust, including how the beneficiary can use the money and when they can access it. A lawyer or a notary public must prepare trust documents.

Sign the trust documents

Once the trust documents are prepared, they must be signed by the trustee and the beneficiary. A third party must witness the signature over 18 years of age.

Register the trust

The next step is to register the trust with the Australian Taxation Office (ATO). You’ll need to provide some personal details and the name and date of birth of the beneficiary. You’ll also need to provide your driver’s licence or passport to prove your identity.

Lodge tax returns

If the trust earns any income, you’ll need to lodge tax returns on behalf of the trust. Trust income is taxed at the same rates as individual income.

Keep records

It’s essential to keep accurate records of all money deposited into and withdrawn from the trust account. You will need to present these records to the ATO if they request them.

What are the benefits of setting up a trust account in Australia?

Protection from creditors

One of the main benefits of setting up a trust account is protecting your assets from creditors. If you owe money to someone and they take legal action against you, they may be able to seize your assets. However, if your assets are held in a trust account, they will be protected from seizure.

Avoid probate

Another benefit of setting up a trust account is that it can help to avoid probate. Probate is the procedure of having your will validated by the court. It can be a lengthy and expensive process. However, if your assets are held in a trust account, they will not need to go through probate.

Flexibility

Trust accounts also offer flexibility in how your assets are managed. For example, you can specify that the trustee can only make withdrawals, such as education or medical expenses.

Tax advantages

Trust accounts also offer some tax advantages. For example, if the trust is for a child’s taxed , the money in the account can be taxed at a lower rate than if it is held in an individual’s name.

Peace of mind

Finally, trust accounts can provide peace of mind. Knowing that your assets are protected and that your loved ones will be financially secure can give you peace of mind.