In the realm of estate planning, drafting a Will is often the cornerstone of ensuring your assets are distributed according to your wishes. Within the framework of a Will, however, incorporating a trust (or trusts) can offer added layers of protection, control, and flexibility. At Whyte, Just and Moore, we specialise in Wills and Estate Planning, assisting clients in navigating the complexities of trusts to safeguard their legacies. In this guide, we explore the common types of trusts used in Wills, the significant benefits they offer and why they are valuable tools in estate planning:

Defining Wills and Trusts

Before delving into trusts, it is crucial to understand some basic terminology. A Will is a legal document outlining how you want your assets distributed after your death. It allows individuals to specify beneficiaries, appoint executors, and provide instructions for the distribution of their assets. A ‘trust’ is a legal arrangement where assets are held by one party (the trustee) for the benefit of another (the beneficiary). Trusts can be established during your lifetime (living trusts) or through your Will (testamentary trusts).

Common Trusts in Australian Wills

Discretionary Trusts

Also known as Family Trusts, discretionary trusts offer flexibility in asset distribution, which is particularly useful when beneficiaries have varying financial needs or tax situations. Discretionary trusts can also offer asset protection benefits, shielding assets from creditors or legal claims. In the case of discretionary trusts, a trustee has discretion over how or when assets are distributed among beneficiaries. A discretionary trust therefore separates ownership from control.

Testamentary Trusts

A testamentary trust, established within a Will, allows beneficiaries the flexibility in how they receive their inheritance. Opting for this trust can provide asset protection, as assets are held within the trust rather than personally, safeguarding them from creditors or risky situations like lawsuits or bankruptcy. Additionally, there are potential tax advantages, especially for minor beneficiaries, as income can be distributed in a tax-efficient manner. The trust can last up to 80 years after the person’s death and can benefit various potential beneficiaries, including family members, companies, and charities. If the primary beneficiary passes away, the trust can either be wound up and assets distributed or continue until the trustee decides to close it.”

Special Disability Trusts

Special disability trusts are designed to provide for the future care and accommodation needs of a family member with a severe disability. Through Special Disability Trusts, eligible individuals can receive tax benefits as well as access to various welfare payments provided by the government. These trusts can enhance the quality of life for your loved one with a disability, while preserving their eligibility for government services and support programs.

Benefits of Incorporating Trusts in Your Will

  • Asset Protection – Trusts offer a layer of protection for assets against creditors and legal claims. By placing assets in a trust, they are no longer considered part of the estate, reducing the risk of loss due to unforeseen circumstances such as creditors, lawsuits, or divorce settlements.
  • Tax Efficiency – Certain trusts offer tax advantages, allowing you to minimise the tax liabilities for your beneficiaries.
  • Control and Flexibility – Trusts enable you to dictate how, when and to whom your assets are distributed, providing peace of mind, and ensuring your wishes are carried out.
  • Preservation of Government Benefits – Trusts tailored for specific purposes, such as supporting family members with disabilities, can safeguard their eligibility for government assistance programs.

Contact Geelong’s Experienced Wills and Estate Planning Lawyers

At WJM, we understand the importance of comprehensive estate planning to protect your assets and loved ones. If you are considering drafting or updating your Will to incorporate trusts, our experienced team is here to guide you through the process.

Reach out to the team for personalised advice and peace of mind knowing your legacy is in trusted hands.