A trust account is a bank account that requires the account’s trustee to enter all transactions involving money. A trustee can be an individual, corporation or financial institution. A trust protects assets for one or more beneficiaries by holding the legal title of the assets in trust for them. Sydney, Australia, is home to many financial institutions that provide trusts and related services. What are some things you need to open a trust account?
An individual or institution must serve as a trustee to set up an account. Trustees can be individuals or organizations, such as banks. Banks typically charge fees for opening new accounts, so it’s best to check with your bank on rates and conditions before opening multiple accounts within their institution.
A trust account can hold money in most cases, but it needs a name before being opened. The name might contain ‘trust’; however, others are acceptable too. For example, you could name the account for your child.
A minimum deposit is required to open an account, much like opening a regular account without withdrawal restrictions. However, trustees may need to meet the exact requirements when applying for a loan before withdrawing funds from the trust. Beneficiaries of trusts cannot access funds in their accounts or have withdrawals approved. It might be different if they’re paying bills on behalf of another beneficiary who’s unable to do it themselves.
Trust Investment Portfolio/s
A trustee needs to carefully manage all investments within the trust so that money isn’t lost or withdrawn inappropriately. If you are a trustee, this could include savings accounts, term deposits and other types of investments.
A bank statement is required to approve all transactions involving money, much like when opening a regular account. A trustee needs to check every transaction’s account listing so nothing slips through the cracks.
Remember, this is the beginning of setting up trust accounts and is only intended to provide basic knowledge of what’s involved with setting up an account of this type in Sydney. Trust accounts are legally binding contracts into which assets may be held and used by one or more beneficiaries at some point in time, although not necessarily accessed immediately after their creation. This article does not provide any legal advice, and readers should seek advice from professionals or attorneys for any legal advice or information.
Some Benefits of Having a Trust Account
Trusts Protect Your Assets
If you open a trust account, the trust company will hold the legal title to all your assets. Meaning you can’t spend or use them personally and must act as the trustee only under specific conditions.
Trusts Restrict Access To Funds
A trustee may restrict beneficiaries’ withdrawals from a trust account, either until an event occurs or for a set amount of time. Beneficiaries cannot withdraw funds directly or use their own money for expenses required for daily living expenses such as food, clothing and bills without approval by the trustee. Checks written on trusts might be restricted, so payees need to wait until they receive them from depositing checks directly into their bank accounts before accessing those funds.
Trusts Overcome Joint Tenancy Issues
When joint tenants have passed away, the remaining joint tenant gains full rights to assets without repercussions. However, assets left in trusts are not so cut and dry, which is why you should always consult with a lawyer before setting up a trust account. You can set it up with a living or term beneficiary instead of a secondary beneficiary if you want it established with no impact on inheritances regarding wills and estates.
Trustees Can Provide Money to Beneficiaries
With your open trust account, you can provide funds to the beneficiaries you have set up by giving them benefits or allowances. You can also provide funds for special needs or expenses via trusts so that the beneficiary can access more money than they might receive through other means.
Trustees Can Control Distributions of Income/capital
You can decide how much, when and in what way your trust is distributed to various members. There are two types of trusts involved with distributions which is why you should discuss this benefit with a lawyer before setting up any trust account. It includes discretionary trusts that require approval each time before distribution occurs and unit trusts that provide set distribution rates according to predetermined criteria.