Week One - Types of Business Entities (Trusts) Flashcards

1
Q

When does a trust exist?

A

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

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2
Q

Is a trust a separate legal entity?

A

No, it is not

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3
Q

How is a trust settled?

A

By a deed of settlement

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4
Q

What is the degree of liability for the trustee?

A

The trustee is personally liable for debts and liabilities

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5
Q

Are there any limits on beneficiaries?

A

There are no limits on the number of beneficiaries

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6
Q

What are TWO common examples of trusts?

A

Superannuation Trust

Testimony Trust

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7
Q

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

A

True

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8
Q

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

A

True

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9
Q

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

A

Disadvantage

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10
Q

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

A

Disadvantage

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11
Q

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

A

True

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12
Q

What are the three main roles or trusts positions?

A
  1. Individual/Corporate Trustee
  2. Trading Trust (Trading As Business Name)
  3. Beneficiaries
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13
Q

What is the roles of individual/corporate trustee?

A

Makes the decisions regarding the trust

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14
Q

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

A
  1. Owns and reports business operations
  2. Distributes profits to beneficiaries
  3. Used to trade for benefit of beneficiaries
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15
Q

What are the roles of beneficiaries?

A
  1. Record trust distribution as taxable income

2. Do not own assets (scope for protection)

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