🐻Bare trust vs Unit trust

Bare trust -

A legal structure where assets are transferred from the beneficiary to the name of the Trustee. The trustee legally holds assets on trust for each Beneficiary (investor).

• Good for investing shares, options and convertible notes & speculative investments

• The trustee has no say on how the capital or income of the trust is distributed.

• The beneficiary can call for the capital, assets and income of the trust whenever they want. (they can get their investment back)

• The trustee must distribute the profits or returns and transfer the assets to the beneficiary if they ask.

Speculative investment - Investment that can make an extraordinary profit but also a high possibility of losing most or all of an investor's initial investment. Eg Crypto or digital currencies or foreign investments

Stamp duty - tax that state and territory governments charge for certain documents and transactions

Benefits of a bare trust

• Cheaper to operate than a unit trust (costs include Trustee fee (fee managers charge for their services), Stamp Duty and Capital Gains Tax (CGT)

Unit trust -

A legal structure that holds assets for the benefit of unit holders. A trustee administers the trust, makes decisions about trust assets and is responsible for distributing income and capital according to the number of units each investor holds. Any profits made by the trust must be distributed to unit holders at the end of the financial year.

Example - U-DAO is a unit trust where beneficiaries (investors) invest into a unit trust. They are then allocated a unit in the trust depending on the size of their investment. The Trustee is responsible for administering the trust and making investment decisions. Profits made by the trust are distributed to investors annually

Unit Trust vs Bare Trust

• In a Unit trust, the legal entity holds the assets, whilst in a bare trust, the Trustee legally holds the assets