What is a fixed trust?

A fixed trust is a type of trust where the beneficiaries have a fixed entitlement to the income and capital (assets) of the trust.

This means that the trustee (the person or organisation who manages the assets in the trust) cannot decide what the beneficiaries will get. This is different to some other trusts, such as family trusts, where the trustee has the discretion to decide how the trust income and assets are paid. The trust deed says who gets what from the trust income and assets. A trust deed is a document written by a lawyer that sets out the trust arrangement and what the trustee can and can’t do.

In financial or legal arrangements, a fixed trust is often used for estate planning, asset protection, and tax planning.

Fixed trusts are often used in situations where the settlor (the person who sets up the trust) wants to make sure that the beneficiaries receive a specific share of the trust’s assets. This provides certainty to the beneficiaries.

Advantages

Fixed trusts are easier to understand.
Beneficiaries have certainty because they know what they are entitled to get.
Tax is more predictable.
All of this can make financial planning easier.

Disadvantages

A fixed trust can’t be changed. This can be a problem because things change and what was thought to be good at first may not be suitable later.

Simplicity is not always best. The type of trust used depends on the aims of the settlor and the circumstances of the beneficiaries.

Setting up a fixed trust involves several tax considerations, including income tax, Capital Gains Tax, GST, stamp duty, and land tax. You should seek professional legal and tax advice. A decision on what type of trust to use should only be made after talking to an accountant and a lawyer.