Knowing about Bare Trust

Also known as simple trust a bare trust is a kind of trust where trustee simply holds the property of and on behalf of the concerned beneficiary. What happens is the trustee is just the nominee of the beneficiaries and he or she has neither has any power nor performs any active duty other than just to transfer the concerned property to beneficiary when requirement arises. Hence, it is a common practice to set up this kind of trust to provide assets to the minors since they cannot manage the assets by themselves and the trustee’s appointment allows an effective assets management with the certainty that it would go to the mentioned beneficiary.  

If you are planning to set up one such fund then you must know that after the trust has been set up beneficiaries cannot be changed. Simultaneously the gain and the income rising on trust fund are treated as accumulating to beneficiaries from tax viewpoint.

The use of bare trust is not just limited to transferring assets to the minors only but is also quite popular with SMSF industry because of the ability of letting a SMSF to borrow funds from the lender while complying with the security need of the lender but not compromising the SIS or Superannuation Industry Supervision Act.

At the basic level the bare trust lets the lender to take security over a SMSF asset while it is held outside the structure of SMSF, which is the bare trust. If the loan is not paid back the lender now unable to pursue SMSF for the payment but has the power to claim property held in that bare trust.

As it is now understandable that these activities require proper paper work and it is suggested to hire the professional service of legal documentation as well as advisory service to ensure that each of the activity is compliant as per the rules and policies of Australian government. You should also remember that banks have varied requirements in terms of clauses they want to see in bare trust.

With the help of reputed and professional legal documentation service you will have the opportunity to alter the clauses in your trust deed in order to suite the chosen lender. It is also suggested to contact the concerned lender to get a requirement list and provide the same to your chosen legal documentation service at the time of ordering your document. In case of minor changes of deeds many documentation service doesn’t charge you anything.