The costs of opening a trust account in Sydney

A trust account is a bank account used to hold money or assets on behalf of another person, typically a minor. The legal onus is on the trustee to manage the account in the beneficiary’s best interests and ensure that the funds are used for their intended purpose. Trust accounts are subject to several regulations, including those set by the Australian Securities and Investments Commission (ASIC). Investors may open a trust account for various reasons, including to:

  • safeguard investments from volatile markets
  • provide for a dependent family member with special needs
  • minimise the impact of taxes on inheritances
  • manage property holdings

Several costs are associated with opening and maintaining a trust account, depending on the bank and the type of account. The most common fees are for administration, custody and investment management.

Administration fees

These are charged by the trustee (usually a bank or financial institution) for setting up and managing the account. They can be a one-off fee, an annual fee or a percentage of the assets held in the trust.

Custody fees

If you use a professional trustee service, they will charge custody fees for holding and managing the trust assets. These can be a flat fee or a percentage of the assets held in the trust.

Investment management fees

If you invest trust funds in managed investments such as shares, funds or property, there will be fees charged by the investment manager. These can be a flat fee or a percentage of the assets invested.

Taxation

Trusts are subject to taxation on their income and the capital gains they make. The tax rate depends on what trust is opened and the beneficiaries’ tax circumstances.

Legal costs

You may need to appoint a lawyer to establish the trust and prepare the trust deed. There will also be ongoing legal costs of complying with the trust deed requirements and the applicable laws. These can vary depending on the complexity of the trust structure and the assets held in trust.

Other costs

There may be other costs associated with setting up and maintaining a trust, such as account-keeping fees, audit fees and insurance premiums. These will vary and are dependent on the type of trust and the assets held in trust.

What are the benefits of opening a trust account?

Asset protection

One of the primary benefits of a trust is that it can help protect your assets from creditors and lawsuits. The aforementioned is because the assets are held in the trust’s name rather than yours.

Tax efficiency

You can also use a trust to minimise the impact of taxes on your wealth. The aforementioned is because trusts are taxed at a lower rate than individuals, and you can use them to split income between family members in a tax-effective way.

Flexibility

A trust gives you a high degree of flexibility in how you can structure your finances and use the assets held in trust. For example, you can specify that the trust assets are only used for specific purposes, such as education or health care.

Professional management

If you use a professional trustee service, they will manage the trust on your behalf, taking away the burden of managing the trust and ensuring that it is run following the law.

What should you consider before opening a trust account?

The costs

As with any financial decision, you need to weigh the costs and benefits of setting up a trust. The costs can include administration fees, custody fees, investment management fees and taxation.

The purpose of the trust

Before you establish a trust, you need to decide the purpose of the trust. It will determine the type of trust you set up and its assets.

The trustees

You need to appoint one or more trustees to manage the trust on your behalf. It can be a professional trustee service or an individual trustee such as a family member or friend.

The beneficiaries

It would be best to decide who will benefit from the trust as it will determine the trust structure and the tax implications.

The duration of the trust

It would be best to decide how long you want the trust to last, determining the terms of the trust deed and the tax implications.

Open a trust account today

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