Example of strategically distributing income with a discretionary trust

I decided to have some fun and use the cast of The Big Bang Theory to give some examples of how the general advantages of discretionary trusts could help in their situation. See if any of these examples could apply to you.

Income distribution

Let's assume that Penny will always work at the Cheesecake Factory for minimum wage and unfortunately never makes it big in Hollywood.

And let's say that in his spare time when he is not working at the university, Leonard invents some sort of new laser which he sells around the world.

Now before he embarked on this laser venture, he created a discretionary trust to run this very business. Luckily he did so, otherwise the profits from his laser business would be taxed in his own name on top of his salary from the university which would probably propel him up a tax bracket or two. (This is because in Australia we have a progressive tax system where the more you earn, the higher rate of tax you pay. Um Australia? Yes, let's assume that everyone in the series also moved to Adelaide.)

Leonard's accountant notices that Penny's tax return shows very little income from her wages and advises Leonard that his trust could distribute the laser business profits to Penny instead of him since she is in a much lower tax bracket. Penny agrees as long as Leonard pays her tax bill and takes her out to a movie which is not a documentary or a sci-fi. Leonard is happy to do so since his tax savings far outweigh a couple of movie tickets and popcorn. Everyone is happy. Cue the theme song with credits.

These illegally-obtained pictures take up quite a bit of space so I might split these up to one example per post. Stay tuned for another example of how discretionary trusts could help you and let me know if you have any questions or want more details.