Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
Purpose: succession and protection
A family trust is a private trust — quite different from a charitable trust. Its main value is succession planning (passing assets to the next generation smoothly, avoiding probate delays and disputes) and asset protection (ring-fencing family wealth). Tax is a secondary, structural consideration, not the headline benefit.
The tax position
A family trust is not exempt. Depending on whether it is a specific trust (beneficiaries and shares defined) or a discretionary one, its income is taxed either in the beneficiaries’ hands or in the trust’s at applicable rates (sometimes the maximum marginal rate). Used carefully, it can manage how and where income is taxed across the family, but clubbing and anti-avoidance rules apply. The tax outcome is structure-specific — get it designed properly.
A worked example
Example: a business family settles its investments and a property into a family trust, so on the patriarch’s passing the assets transfer to the next generation per the trust deed — smoothly, and shielded from individual creditors — while income is taxed under the trust’s rules. The benefit is control and continuity, with tax managed, not eliminated. Our team can design a family trust for your goals.