TRANSCRIPT: What is a Discretionary Trust?

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Hi Guys! Ryan Colin here from Compare Return, where our job is to connect Expats with Experts.

Today’s topic is about Beneficiary Trust planning. Why might you use a beneficiary trust? Who might benefit from them? What the structure involves? So, just quickly we are also going to be doing a video about discretionary trusts. So, those are also known as “Trust Funds.”

So, if you are looking for a structure where you can put more than five million dollars’ worth of assets in you know property companies and all that, the discretionary trust video is worth looking for, you will find the link up here. So, today’s video is about beneficiary trusts. So, what is a beneficiary trust.

Now a beneficiary trust is effectively a bond or an investment bond, which is an investment account when you are alive and when you pass away, it turns into a trust upon death. So, that means that you can have some taxation benefits while you are alive you can also have taxation benefits for the people, you are passing it on to. You also retain control while you are alive.

So, the assets are still within your name and you retain full control. If you are the kind of individual who likes to also manage your own investment structures, this can be a benefit as well finally beneficiaries. So, the main reason why people take out a beneficiary trust, is to ensure that after they pass away, exactly what they want to happen with their money will.

So, what we are going to do now and the best way to explain a beneficiary trust is to go through a case study. So, let us get started. Today’s case story… the case study is Barry King. So, this is a typical client profile that I might run into here in Thailand. So, Barry is an Australian who’s 57 years old. He works in oil and gas and he has got a four-year-old son, Jackson and he has got a 37-year-old wife Ploy. So, Barry’s in his 50s who has a wife in her 30s and a young child.

Now, Barry’s concern is that if he were to pass away because he does do a dangerous job, what would happen to his money? So, currently he might just have an investment account, which is attached to a will and then you know if he passes away, what might happen is that the executor of the will has to settle some debts and there might be a claim against his estate you know if there’s anyone who feels like that are owed money, an ex-wife or anything like that then the money that he’s got is going to be tied up into probate court and that could take a very long time.

It might be years before the money gets outside of the court system and that is not going to help his son, Jackson out or his wife Ploy. So, what he wants is to set up an account where when he passes away, his son and his wife are not only looked after but they looked after in an extremely specific fashion. So, the beneficiary trust and final will what he does he takes out a beneficiary trust.

It could be somewhere such as the Isle of Man, which then allows him to move his current investments into the trust. He might have stocks and shares with Citibank or HSBC or even his own Australian shares allows him to take the investments out of his current account, place them into the beneficiary trust.

Now, what happens is when his alive, he can still hold the stocks and shares and invest like he normally does but when he passes away the…the policy is enacted. So, then becomes trust. Now, it is a capital redemption policy.

There are two main types of beneficiary trust, Life Assurance. Now, what a life assurance account does is it pays out to 100% of the policy values straight out to a percentage of the beneficiary. So, it might be 50 percent to the wife, 50 percent to a son….25 percent to a son and 25 percent to a daughter, totalling a hundred that’s life assurance.

The second type is what is called capital Redemption. This means that the policy remains open and invested even after he passes away. So, Barry passes away his investment bond becomes our trust, which is then enacted through his lawyer or executor. So, when I sit down has got a will and testament. The will and testament states that the beneficiary trust is to pay out to his son Jackson at say 1 million Thai Baht a year up until the age of 18 and that is to cover off education expenses, is to cover off Vince and accommodation and living expenses for his son and his wife.

When Jackson hits 18, the rest of the account is to cash out and pay out as a percentage to his wife Ploy and his son Jackson. Now, Barry knows that when he is alive, he still has access to his investments. He can invest how he wants in a tax efficient manner. Should he ever pass away, he knows his wife Ploy and son Jackson is looked after.

Now, the tax benefits in this regard are if you were to go back to Australia. So, there is what they call a 10-year rule in Australia. A beneficiary trust is also considered a foreign whole of life investment policy by the ATO. That means that if he holds it for 10 years before taking money out of the account, any money that he has in the account is tax-free on drawdown.

So, it means that say if in year one, you took the policy out, in year four, you moved back to Australia and a new 10, he started taking deductions. The time he was in Australia, which is six years, all the growth in that policy is tax-free, which can be a handy little tax benefit for people.

Thanks for watching guys. That is in an introduction to beneficiary trust planning. If you found this video interesting or if you have got any questions, you can feel free to book in with me. You can book in a phone call or a one-hour meeting. All the details for that are going to be in the description of this video.

So, drop down box at the description of the video. If you like this video as well please, subscribe and like.

Thanks guys, bye!

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