Week One - Types of Business Entities (Trusts)

Question 1

When does a trust exist?

Answer 1

When the trustee is required to hold or invest property on behalf of the beneficiary

Question 2

Is a trust a separate legal entity?

Answer 2

No, it is not

Question 3

How is a trust settled?

Answer 3

By a deed of settlement

Question 4

What is the degree of liability for the trustee?

Answer 4

The trustee is personally liable for debts and liabilities

Question 5

Are there any limits on beneficiaries?

Answer 5

There are no limits on the number of beneficiaries

Question 6

What are TWO common examples of trusts?

Answer 6

Superannuation Trust

Testimony Trust

Question 7

True or False: A disadvantage of a trust is that it is an expensive and complicated structure for distributing profits?

Answer 7

True

Question 8

True or False: A disadvantage of a trust is that it is difficult to obtain loans from structure?

Answer 8

True

Question 9

Advantage or Disadvantage: The Trust Deed has to state the powers of the trustee and this can prove difficult in regulating the trustee?

Answer 9

Disadvantage

Question 10

Advantage or Disadvantage: The trust distributed profits but not losses?

Answer 10

Disadvantage

Question 11

True or False: A trust cannot trigger capital gains trust?

Answer 11

True

Question 12

What are the three main roles or trusts positions?

Answer 12

1. Individual/Corporate Trustee
2. Trading Trust (Trading As Business Name)
3. Beneficiaries

Question 13

What is the roles of individual/corporate trustee?

Answer 13

Makes the decisions regarding the trust

Question 14

What are the roles of trading trust trading as business name?

Answer 14

1. Owns and reports business operations
2. Distributes profits to beneficiaries
3. Used to trade for benefit of beneficiaries

Question 15

What are the roles of beneficiaries?

Answer 15

1. Record trust distribution as taxable income

2. Do not own assets (scope for protection)