This precedent is a template deed establishing discretionary trust.
A discretionary trust in the nature of this precedent allows for control of the trust property without beneficial ownership of it. It provides a unique degree of flexibility in deciding who should benefit from income earned and from capital gains. Persons who might benefit from time to time during the term of the trust (beneficiaries) should be determined when the trust is created. While they may be added or deleted during the life of the trust, stamp duty considerations should be taken into account before using the power.
A discretionary trust is most suited to a family situation, as a business relationship will require a greater degree of certainty and security in financial dealings affecting trust property.
The commercial advantages of discretionary trusts are:
· allows for changes of / choices between beneficiaries; and
· generally, provisions of Corporations Act 2001 (Cth) (Corporations Act) are not applicable. See section 197 of Corporations Act which makes directors of a trustee corporation liable for debts and other obligations incurred by the trustee in certain circumstances
Persons entitled to receive moneys from the trust, and the financial affairs of the trust, need not be disclosed on public records. Whilst proper accounts must be kept, necessity for audit can be made optional and winding up the trust is a relatively simple procedure.