What is the effect on being a primary beneficiary of one trust and also a trustee of another trust?

By way of general comment and not a specific advice, being a primary beneficiary of one trust and a trustee of another trust can have different implications relating to taxation or legal obligations, depending on the specific circumstances. Here are some general considerations:

Fiduciary Duties: A trustee is subject to fiduciary duties, including the duty to act in the best interests of the beneficiaries of the trust. This role is separate and distinct from any benefits they may receive as a beneficiary of another trust.

Conflict of Interest: If the trusts have dealings with each other, a conflict of interest could arise. The person would have fiduciary responsibilities as a trustee to act in the best interests of the second trust, which might conflict with their interests as a beneficiary of the first trust.

Income Distribution: If the person receives income as a beneficiary from one trust, that income is generally taxable.

Trustee Responsibilities: If the person is a trustee of another trust, they have an obligation to manage the trust in a manner beneficial to its beneficiaries, which may involve distributing income, the tax implications of which would also need to be considered.

Regulatory Oversight: In some instances, the  ATO could review the arrangement, especially if there are transactions between the two trusts, to ensure there is no tax avoidance or evasion.

Please be advised this is general information only, and is not to be taken as legal advice. If you would like more information, or have a legal query, please contact Abbott & Mourly directly.
Reviewed: 17/01/2024