Transferring property to a trust involves significant costs, primarily stamp duty (often tens of thousands, calculated on market value per state laws) and legal/conveyancing fees (hundreds to thousands for trust setup and deed preparation), plus potential Capital Gains Tax (CGT), valuation fees, and ongoing trust administration costs, though some exemptions for stamp duty might apply in specific cases (like certain family transfers or deceased estates).
You can transfer the property title to the trust by either selling the property to the trust or gifting it to the trust. Both may have CGT and stamp duty implications.
It can help save on tax by distributing income efficiently
For property investments, trustees can allocate rental income and capital to beneficiaries in the most tax-effective way each financial year — usually by distributing funds to beneficiaries in lower tax brackets, typically spouses or children.
The cost of establishing a family trust is generally $1,000 to $2,000 depending on the structure used.
Selling the property to a family trust is another way to transfer ownership. The process would be the same as any real estate transaction, except you are the seller and the trustee is the buyer. You can sell it below or at market value, either way, you may still be liable for the capital gains tax.
The crackdown has resulted in the ATO undertaking extensive audits of family trusts and historical distributions, and the issue of hefty Family Trust Distributions Tax (FTD Tax) assessments for noncompliance – being a 47% tax (plus Medicare levy) along with General Interest Charges (GIC) on any historical liabilities.
The 5x5 Power rule is a way to provide some parameters around the access a beneficiary has to the funds in a trust. It means that in each calendar year, they have access to $5,000 or 5% of the trust assets, whichever's greater. This is in addition to the regular income payout benefit of the trust.
A family trust typically pays zero tax on income inside the trust. Instead, the income is distributed to the beneficiaries, who are taxed at their personal tax rates. However, a family trust cannot distribute a tax loss to beneficiaries.
Loss of Ownership of Assets Held in the Family Trust
You won't have personal ownership of those assets because you're using the family trust as a vehicle to purchase and hold assets. The trustee is the legal owner of those assets.
With a trust, there is no automatic judicial review. While this speeds up the process for beneficiaries, it also increases the risk of mismanagement. Trustees may not always act in the best interests of beneficiaries, and without court oversight, beneficiaries must take legal action if they suspect wrongdoing.
The simplest way to give your house to your children is to leave it to them in your will. As long as the total amount of your estate is under $15 million (per individual, in 2026), your estate will not pay estate taxes.
10 Assets You Should Leave Out of Your Living Trust
An irrevocable trust offers your assets the most protection from creditors and lawsuits. Assets in an irrevocable trust aren't considered personal property.
Depending on your state, this may look like a grant deed, a gift deed, or other applicable property transfer documents. The deed and change in ownership form are then filed with your local county recorder's office.
The 2% property rule is a real estate investing guideline where you check if a rental property's monthly rent is at least 2% of its purchase price, indicating strong potential for positive cash flow and profitability; you calculate this by dividing the monthly rent by the property's total price and multiplying by 100, aiming for 2% or more to deem it a good deal, though it's a simplified metric, notes Rentana and Abacus Finance.
Family trust distribution tax is payable at the top personal marginal tax rate, plus the Medicare levy (for a total of 47% at the time of writing), and the beneficiary cannot claim this tax as a credit. If the trustee is a company, the trustee and the directors of the company are jointly liable for the tax.
Set up and ongoing costs: Establishing a family trust will cost between $1500 and $3000 in legal and professional fees. At minimum, annual accounting, tax returns and trust resolutions will cost between $1000 and $2000 annually. Using a company as the trustee adds additional layers of complexity and costs.
Compared to wills, living trusts are considerably more time-consuming to establish, involve more ongoing maintenance, and are more trouble to modify. A lawyer-drafted trust typically costs more than a thousand dollars, though the cost will shrink dramatically if you use a self-help tool to make your own trust.
A number of well-known banks in the UK have stopped offering traditional banking services to trusts, citing issues such as cost, complexity and compliance as reasons for exiting a long-established part of the market. One of the key issues is a lack of understanding around the nuances of different types of trusts.
Family Trust Asset Protection
As the investment property is held in the trustee's name, not your own, the property is protected from creditors if one of the beneficiaries goes bankrupt or is the subject of legal action. This means creditors can't use the property to settle any debt owed.
If a trust earns income (as most of them do), taxes will need to be paid on that income — just as individuals and businesses generally have to pay taxes on the income they earn. There are two types of income tax rates that could apply to trusts: ordinary income tax and capital gains tax.
One of the tax advantages of a family trust is related to capital gains tax (CGT). Namely, the 50% CGT discount if the assets are held for longer than 12 months. This discount effectively halves the taxable capital gain, potentially resulting in significant tax savings.
(Probate Code section 15501). The current NOPA procedure for trust administrations requires a notice period of 45 days, during which a beneficiary may object to the proposed course of action. (Probate Code section 16502).
How long does a trust last? In NSW, a private trust can last for up to 80 years. The trust deed will set out how long it should last and can specify a shorter term – often based on a specific event happening, such as someone dying or reaching a certain age.
The 7 year rule
No tax is due on any gifts you give if you live for 7 years after giving them - unless the gift is part of a trust. This is known as the 7 year rule.