There are many facets to accounting; trust accounts is one of them. If you’re new to trust accounts, then your understanding of them may only be that the wealthy set them up for their children’s inheritance. Well, this isn’t all that accurate. While they can be used in this manner, they are more useful and practical in a variety of other circumstances.
The truth is, anyone can set up a trust account, and it can be for a variety of reasons; both personal and business. If you need to set up a trust or would like to find out more about trusts accounts and whether you might need one, then you’ve landed on the right page. Continue reading as I explain what a trust account is and how they work.
What is a Trust Account
A trust account is a legal arrangement where assets are held by a third-party on behalf of another party. The third-party is known as the trustee, the other party is the beneficiary, and the person creating the trust is called the settlor. The trust beneficiary can be a group or an individual, and the assets can be anything of value, including cash, real estate, stocks, bonds, jewellery, etc.
There are many types of trust accounts, each of which has specific procedures, regulations and tax rules. Some of the most common types of trusts in Australia include living trusts, charitable remainder trusts, irrevocable trusts, special needs trusts, testamentary trusts, and revovable trusts.
The type of trust you choose will be dependant on what you want to do with your assets. You can find out more about each type of trust on the AOT website.
How Does a Trust Account Work?
Despite the various types of trusts that exist, they all operate in under the same basic concept. This being, they each require a settlor to provide the funds, a trustee to hold the funds and a beneficiary to receive the funds.
We all work with trusts on a daily basis without even realising it. For example, how many times have you given your child’s grandparents money to buy things for your kids while they babysit? In this example, you are the settlor, your child’s grandparents are the trustee, and your children are the beneficiaries. This example, albeit basic, is essentially how trusts work.
Trusts are great for passing on assets to beneficiaries safely. They are also handy for separating one’s assets from his or her portfolio; shielding said assets from potential creditors or plaintiffs. In some industries, such as the real estate industry, trusts accounts are a legal requirement and have to be audited throughout the year to ensure funds are properly kept and compliant with legislation.
How Do you Set Up a Trust Account?
Grow Advisory Group can easily set up a trust account for you. To create a trust account, the following information is required:
- the settlor’s details
- the name and description of the trust,
- the trustee’s details
- the beneficiary’s or beneficiaries’ details,
- assets owned by the trust,
- duties of the trustee, and
- instructions as to what should happen if any party were to pass away or become incapacitated.
A trust account can be a valuable tool for those with assets. They can designate who receives your estate, protect your assets and business from creditors or plaintiffs, and also provide many tax advantages.
At Grow Advisory Group, setting up and managing trust accounts is just one of the many services we offer for individuals and businesses. If you would like to enquire about setting up a trust for yourself or your business, then contact us today.
We have extensive knowledge in setting up trusts accounts and can advise on which type of trust will best suit your wishes. We also provide an affordable trust account audit service to ensure your account is compliant and correctly maintained.