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Can the settlor of a discretionary trust reside overseas?

There is no legal requirement that the settlor be an Australian resident. A trust will be a resident Australian trust provided that the trustees of the trust reside in Australia, even if the settlor resides overseas.

However, it may be best that the settlor be a person who resides in Australia, for the following reasons:

  1. The laws of a foreign country may possibly provide that a trust will be subject to the laws (including tax, stamp duty, etc) of that foreign country if the settlor of that trust resides in that country.  We cannot advise in relation to the laws of foreign countries; and
  1. Our view is that a trust is more likely to be held to be a “valid” trust if the settlor is an Australian resident.  If the settlor is an overseas resident, the trust may be more likely to be challenged, e.g., by a third party in court.

 

In any case that the settlor’s role is to “settle” the trust by paying the settlement sum (of say, $10), and signing the trust deed.  The settlor has no other involvement with the trust.