Trust – advantages and disadvantages

A Trust is formed when a trustee holds the assets and runs the business, distributes incomes to beneficiaries, and follows the provisions in the trust deed. Consider a Trust if more than one family is involved in running the business.

Advantages of a Trust include that:

• limited liability is possible if a corporate trustee is appointed
• the structure provides more privacy than a company
• there can be flexibility in distributions among beneficiaries
• trust income is generally taxed as income of an individual.

Disadvantages of a Trust include that:

• the structure is complex
• the Trust can be expensive to establish and maintain
• problems can be encountered when borrowing due to additional complexities of loan structures
• the powers of trustees are restricted by the trust deed.