Trust – advantages and disadvantages

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Last updated on February 27, 2017

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.

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