Buying Shares Through a Family Trust

Hi guys,

This is my first post and I'm very new to the share market. I tried searching for my answers but I couldn't find anything that hit the nail on the head.

Here is my situation:

I have a company that was set up so that it could be licensed to operate another business. The profits this company generated got distributed through a discretionary family trust. (At the time it was just myself and my wife). I have since moved on to more satisfying work where I am director of another company with a partner.

So my original company and family trust have not been used in over a year (though I have paid the fees to keep them open). It seems like the expense to set them up would be best not wasted so I was looking at using at the very least the Family Trust to invest in shares for my children.

My plan would be to buy a balanced portfolio of ETFs and A-REITs and regularly contribute to that for my kids (maybe once a year). The dividends would be reinvested and the investment income would be distributed amongst my family. I'm pretty sure that's all fairly simply and it should work (though I'm happy to hear of other methods).

My issues is that for the life of me I'm not sure how to actually buy shares through the family trust. I have an account with CMC Markets that is in my name and my wife's but I'm not sure I can use that. If this is something that I have to set up using a lawyer or accountant then I guess that's what I have to do but if it's simple I'd rather just get it done and start investing. Can anyone point me in the right direction?

It depends who/what is the appointed trustee of the discretionary trust. Assets held in trust are held in the name of the trustee. If you personally are the trustee, then usually/ideally you would open some sort of sub-account that says something like "Joe Bloggs, as Trustee for the Bloggs Family Trust". If the trustee is a company, then the company must open a trading account in its name. something like "Company XYX Pty Ltd, as Trustee for the Bloggs Family Trust". That makes it 100% clear which assets are held in trust and which are held by you personally.

PS: I *strongly* suggest you have a chat with your accountant and/or solicitor to get proper advice here, as stuffing it up could be a very expensive mistake to rectify (due to capital gains tax event/issues etc), and a lot depends on the specifics of your set-up.

Beej said:

It depends who/what is the appointed trustee of the discretionary trust. Assets held in trust are held in the name of the trustee. If you personally are the trustee, then usually/ideally you would open some sort of sub-account that says something like "Joe Bloggs, as Trustee for the Bloggs Family Trust". If the trustee is a company, then the company must open a trading account in its name. something like "Company XYX Pty Ltd, as Trustee for the Bloggs Family Trust". That makes it 100% clear which assets are held in trust and which are held by you personally.

PS: I *strongly* suggest you have a chat with your accountant and/or solicitor to get proper advice here, as stuffing it up could be a very expensive mistake to rectify (due to capital gains tax event/issues etc), and a lot depends on the specifics of your set-up.

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I really appreciate your help.

I'll have a look at the documents and see exactly who the trustee is. I will also speak to the accountant to find out their recommendations. I wanted to get the share parcels before my daughter's 1 year birthday but I'm assuming if I buy it with my normal account and then have to transfer it that might be costly so I may just hold out until January. (Overseas from tomorrow morning for 3 weeks).

I guess if the share market goes up in value in the mean time I'll just have to put a little bit more into the account to offset it. No point baby getting punished for daddies sloppiness.