Foreign settlor – Family Trust

The settlor has to be a person – natural or company. I think a settlor can be a beneficiary, but this will introduce tax problems. But I have never looked into this – although i did see one client who had his son as settlor for some reason.

Why create the uncertainty? Just set up the deed here and get joe blow to be settlor – someone who you will never want to distribute to.

A trustee is not an 'owner', therefore they may not gift the property although they may be able to settle under instruction of a beneficiary.

However that beneficiary must have a sufficient interest in the property under the o/s trust deed to enable them to give direction.

Cheers,

Rob

You could have foreign beneficiaries. Nothing wrong with that, Just consider the tax consequence as non residents pay higher taxes.

The overseas trust could loan or gift to Australian trust. No real tax consequences on gifts. If a loan and you want to pay interest there will be tax issues. The trustee may have to withhold tax or the interest may not be claimable if you control the overseas trust and the ATO considers it your money – especially if the trust is located in a tax haven.

Genuine gifts are not taxed in Australia, but there may be gift duty in the country of residence.

If you make the local trust a beneficiary of a foreign trust then there is a lot more to consider.

You still haven't explained how the o/s trustee will 'gift' what is not their's to deal with.

Its the way you do it that matters.

Cheers,

Rob

This is a complex question.

Once Joe becomes a resident here for tax purposes he would have to declare his interest in the trust over there and would probably have to pay tax on the income of the trust even though it is overseas. He needs good advice.

To start off here Joe could get a loan from the os trust or a gift – but again he will need advice as the ATO has introduced complex rules regarding trusts. He could find himself taxed on the loan as if it is income if not planned properly.

In Australia you must pay stamp duty on land transferred into a Trust, in all states I think. Shares no longer have stamp duty problems, but transferring shares may cause CGT to be payable by the transferor. If you want to introduce cash to the trust you can do so as a gift or a loan = each with different consequences for asset protection

Yes, it is very common. Most trusts are now non-revocable trusts, and the settlor can not be a beneficiary.
Funds are generally loaned to the trust, and are deemed to be available on a 'at-call' basis. Generally interest is not paid, as the loaner of the funds doesn't want the extra income. They are generally setting up a trust to help minimise tax, so the interest is generally not charged.

I don't know about that. That could still possibly trigger stamp duty on the assets of the trust and possibly CGT if it is considered a resettlement. You would need an expert trust lawyer to advise.

Why not just leave the funds there and have the o/s trust loan funds to the australian trust? That would probably be safer from an asset protection POV and possibly tax – though being a tax haven would mean you have to be careful.