**Family Trust** (noun) — A trust arrangement established to hold and manage assets for the benefit of family members, providing control over asset distribution, potential tax benefits, asset protection, and a means of passing wealth to future generations according to the settlor's wishes.
A family trust is a legal arrangement where assets are held and managed by a trustee for the benefit of family members. Instead of owning assets personally, you transfer them to the trust, and the trustee manages them according to rules you set out in the trust deed. The family members who benefit from the trust are called beneficiaries.
Family trusts serve several purposes. They can provide asset protection, separating assets from personal ownership to shield them from business risks or legal claims. They can offer tax planning opportunities by distributing income among family members in tax-effective ways. They can also control how and when younger family members receive assets, rather than giving them everything at once.
A typical family trust structure includes a trustee (who controls the trust), beneficiaries (who benefit from the trust, usually family members across multiple generations), and a trust deed (the document setting out all the rules). The person who establishes the trust is called the settlor. The trustee has legal ownership but must manage everything for the beneficiaries' benefit.
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Family trusts are common estate planning tools, particularly for business owners, property investors, and people with significant assets. They're more complex than simply owning assets personally, but the benefits often outweigh the extra complexity and cost for people in certain situations.
Setting up and running a family trust involves ongoing obligations. You need a properly drafted trust deed, appropriate trustee arrangements (individual or corporate trustee), regular financial accounts, annual tax returns, and minutes of trustee decisions. These requirements create administrative burden and cost, which is why family trusts aren't necessarily beneficial for everyone.
Family trusts aren't a way to avoid all taxes or creditors. Tax authorities and courts can look through trust structures in certain circumstances, particularly if trusts are being misused. Professional advice is essential when considering whether a family trust suits your situation and ensuring it's established and operated correctly.
**Related terms:** [Trust](/dictionary/trust), [Trustee](/dictionary/trustee), [Beneficiary](/dictionary/beneficiary)
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