Nathan Yii

Consult a trusts lawyer to work alongside your family lawyer on this. The parties may be able to strike a settlementbetween you and your wife to have an asset of the trust pass to your son under the terms of a binding financial agreement. Whether or not your son can receive an asset from the trust depends on the terms of the discretionary trust deed and whether he is included in the beneficiary class.

Note that there are stamp duty exemptions on the transfer of otherwise dutiable property in Victoriato beneficiaries of discretionary trusts where no consideration is paid between parties.There are also duty exemptions available on relationship breakdown.

CGT rollover relief under family law is available for capital assets passing from trusts to spouses of the relationship as a result of relationship breakdown, but not from the trusts to children.

Also, from a tax perspective, the use of a childsupport trust for the benefit of your son may also be worthwhile consideringif there are substantial assets of the relationship, particularly where child support payments need to be made for the benefit of minor children.

Trustees of discretionary trusts are bound to act on behalf of the broad discretionary beneficiary class and are bound to consider all the beneficiaries in exercising discretion to make distributions of income, capital and when investing moneys. A mere discretionary beneficiary, to the extent that they haven't been allocated any income/capital does not have any proprietary rights to income or capital of the trust. Those beneficiaries are mere discretionary beneficiaries and only have a right of due administration of the trust estate at law (ie they must be considered by the trustee when the trustee makes distributions). The trustee is generally not bound to give its reasons for the exercise of discretion, and can choose to make equal, unequal or no distributions to a particular beneficiary and wouldn't be seen to do anything wrong given the discretionary nature of the trust.

However, having said the above, the terms of the trust deed need to be examined by a lawyer in detail to confirm whether an aggrieved beneficiary has any other recourse. For instance, the terms of the trust may provide for an "appointor" who is the party (separate from the trustee), who is able to appoint and remove the trustee, thus having overall control.

Contact a lawyer to carefully review the terms oftrust for this purpose. Also contact the trust's accountant to get a copy of the latest balance sheetsshowing any unpaid present entitlements/loan accounts owing to particular beneficiaries.

The terms of a modern discretionary trust are likely to have a broad discretionary beneficiary class, including unborn children, related trusts and companies and charities. Depending on the terms of trust, your daughter will be a beneficiary of the trust when she is born.

However, under current taxation law, note that any distributions of income made to your daughter whilst she's under the age of 18 years will be taxed at penalty rates after $416 isdistributed to her in a financial year, unless any of the exemptions in the Income Tax Assessment Act apply.

Consult a lawyer and work with the trust's accountant as to whether making distributions to your daughter will be appropriate.

This is often used in tax planning where trustees want to distribute to a corporate beneficiary (taxed at 30%).

Provided the beneficiary class of the trust is broad enough to include related companies and trustswithin thegeneral beneficiary class,you are able to do this provided the shareholder of the company allows the company to be included in the general beneficiary class. Have a lawyer carefully review the terms of the trust deed and work alongside the trust's accountant.

You mayalso want to considerwhether another family discretionary trust should be the shareholder of the corporate beneficiary, so as to allowflexible distributions of income at the corporate beneficiary level.

It depends on the terms of the discretionary trust - most modern trusts include related companies and trusts within the general beneficiary class. If this is the case, and subject to the trust deed, so long as the estate had beneficiaries who were also beneficiaries of the discretionary trust, that should be fine.Sometimes the trustee also has the power to nominate beneficiaries under the terms of the deed.

Another thing - there can be taxation issues that need to be thought about, in particular whether a family trust election is necessary and if so, who should be nominated as the test individuals for each of the estate and the family discretionary trust (see Schedule 2F Income Tax Assessment Act 1936).

Consult a lawyer on point - preferably the lawyer drafting the Willmaker's Will or administering the deceased estate tosee whetherthe terms of thetrust deed and Wills allow forthe estate to be included as a relatedtrust.