Discretionary Trust Explained

A discretionary trust is a legal structure where a trustee holds assets (like land / property) on behalf of beneficiaries.

Roles in a Discretionary Trust

• Settlor: Creates the trust (lawyer).

• Trustee: Day-to-day manager, legal owner of property.

• Appointor: Ultimate controller (can replace trustee).

• Beneficiaries: People who can receive income/profits.

• Trust Deed: The instruction and rules keeps everyone in line.

Benefits of a Trust for Property Investors

Asset Protection

Holding property in a trust separates the legal ownership from your personal name. This means if you face personal risks — such as business debts, lawsuits, or bankruptcy — the property inside the trust is shielded from creditors.

Tax Flexibility

A discretionary trust allows the trustee to decide each year who receives the income or capital gains from the property. Trusts also usually qualify for the 50% Capital Gains Tax discount if property is held for more than 12 months.

Ownership Transfer

Because the property is legally owned by the trust (through the trustee), you don’t need to change the title if you want to shift control or pass assets to the next person. Instead, control passes by changing the trustee or appointor. This avoids stamp duty, capital gains tax, and other costs as the property title has not changed.

Privacy

When a property is held in a trust, the legal title shows the trustee’s name, not yours. This adds a layer of confidentiality, as it is not immediately obvious who the ultimate beneficiaries are. For high-net-worth individuals and families, this provides an extra level of privacy around property ownership.

Bank Loan Benefit

When property is purchased in a trust, the loan is taken out by the trustee on behalf of the trust, not in your personal name. This means the debt usually doesn’t appear on your personal credit file, helping protect your individual borrowing capacity.