There are four main disadvantages of trusts:
- The cost of establishing the trust
- The cost of managing a trust
Many people have a professional as trustee who will charge for the time spent. How much will depend on what is in the trust and therefore what management is required. However it is unlikely to be less than $400 a year, and potentially could be much more.
- Loss of control
When you sell your assets into a trust, you no longer own them – they are “alienated” from you. Even if you are a trustee of the trust, you cannot deal with the assets as if they were your own – you have to listen to the thoughts of the other trustees and you are required by law to consider the positions of all the beneficiaries in the context of the trust deed. This may not stop the trust doing what you want it to do, however it is not the same as owning the assets yourself. Failure to comply with trust law has seen court proceedings between family members when things go wrong.
- Additional management demands
Having assets in a family trust means that you have another entity to manage. It may mean more tax returns to do, and it will certainly require good record keeping and management.
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