Using a Trust to safeguard your assets Sometimes the best way to protect valuable assets – and the people who are intended to benefit from them – is to establish a well-managed Trust. 

• What is a Trust?
• What sort of Trust fits your needs?
• Why create a Trust in your Will?
• Why create a Trust today?
• How do I choose a Trustee?
• What are the responsibilities of a Trustee?
• Why choose State Trustees?
• Some important things to remember. . .

What is a Trust?
A Trust involves assets [Trust Property] being managed by a Trustee. The Trustee can be an individual, a group of individuals or even a Trustee Company [such as State Trustees]. The main responsibility of the Trustee is to look after the assets in accordance with the terms of the Trust.  These terms are set out in a Trust Deed. The Trust Deed sets the ground rules for the operation of the Trust. It identifies the Trust assets and who may be entitled to benefit from their use or the income they generate.

There are two different legal terms for the original owner of the Trust Property. If you establish a Trust by Deed [ie. before you pass away], you are the Settlor. If the Trust provisions are contained in your Will, you are the Testator.  Those who benefit from a Trust are known as the Beneficiaries.

A Trust can be set up to fund a child’s or grandchild’s education, donate monies to a favourite charity, or for the purpose of protecting certain assets for future generations [ie assets managed in accordance with your wishes].  Money can also be held in Trust for minors [children under the age of 18] or, for children of any
age, who have been injured or disabled as a result of a road or work accident. Funds from such Trusts can generally be used for the care, maintenance or advancement of beneficiaries.

What sort of Trust fits your needs?
These brief descriptions explain the more common types of Trusts State Trustees establishes and administers. However, to ensure you choose the best option to suit you and the needs of your beneficiaries, call us to make an appointment with one of our consultants.

Testamentary Trusts are created by a Will. A Testamentary Trust allows you [the Testator] to specify how the assets will be managed for your nominated beneficiaries after you pass away.  A testamentary trust specifies how your assets,and any income likely to be generated from these assets, are distributed [and continue to be distributed] to your nominated beneficiaries long after you have gone.  Click here for a case study.

Minor’s Trusts are created to protect and maintain assets until a child who is to inherit them reaches 18 [or any other age the Testator specifies]. One of the main reasons for setting up this type of Trust is to finance a child’s education.  Click here for a case study.

Life Tenancy Trusts can be created as a specific type of Testamentary Trust under which the Testator in a Will provides benefits for the life of another person [called the life tenant]. For example, if the asset of a Trust is a house, then the life tenant may be given the right to live there until he or she dies. Alternatively, the life tenant could have the right to any income the property may generate if rented. The Beneficiary, however, has no claim to ownership of the residence whilst the life tenant is alive.   A typical situation in which a Life Tenancy Trust could be used is when a man dies before his second wife, but his Will allows her to go on living in the house he owned, for the rest of her life. The Trust arrangement will end with her death – children from his first marriage, if the Will permits, may then inherit the house.

Inter Vivos Trusts allow people to establish a Trust that comes into effect while they are still alive. Parents or grandparents, for example, can, in their lifetime, set up an Inter Vivos Trust to provide ongoing support for a disabled family member, or even to pay their grandchildren’s future school or HECS fees.  Click here for a case study.

Injury and Compensation Trusts manage the compensation paid to the victims [and their families] of certain kinds of accidents or crimes. The assets involved may be damages awarded by a court or payments made by an insurance scheme [including Worker’s Compensation].

Superannuation Minor’s Trusts are established following the death of a member of a Superannuation
fund if the fund’s Trustee identifies a child or number of children as the Beneficiary/Beneficiaries.

Retiring Trustee arrangements can sometimes be needed when a Trustee of an existing Trust is not able to continue to act as Trustee. This may be due to age, loss of capacity, change of location, increased responsibilities or conflict. In some circumstances, State Trustees can be appointed to take over the role as Trustee to manage the ongoing affairs of the existing Trust.

Why create a Trust in your Will?
By creating a Trust in your Will you are planning for the future use and management of your assets after you have passed away for your nominated Beneficiaries – your chosen family or loved ones.  Assets or funds forming part of your Estate can be allocated to one or more Trusts so that your Trustee [or Trustees] can manage those assets for the Beneficiaries in accordance with your wishes.  This may include ensuring the beneficiaries have use of a Trust property or receive income that may be generated by the Trust’s investments. 

Why create a Trust today?
In some circumstances, you may wish to create a Trust to immediately benefit your nominated beneficiaries – rather than waiting until after you have passed away. This may be useful so you see the immediate benefit of the Trust arrangement you have created [which can also continue after you pass away]. Such Trusts can be useful to set aside funds for the education of family members, provide independent management and protection of your assets, or to provide a structured and effective way of distributing income from your assets to family members. Assets are transferred into the Trust and are managed in accordance with the Trust Deed. Income that may be created from the assets are distributed to the nominated Beneficiaries.

How do I choose a Trustee?
The Trustee chosen to administer any Trust must be someone you regard as being honest, reliable and
trustworthy. They must have the right skills and experience to manage assets efficiently and in accordance with the Trust Deed or Will, and the relevant laws. There is also the question of longevity. Ideally, the trustee will keep administering and managing the Trust for as long as it remains in operation.  In most circumstances, nominating a close friend or relative as Trustee can be seen as a compliment or acknowledgment of loyalty. However, it can also impose a burden on any individual, particularly if they don’t have the relevant professional experience as well as the time and energy required to responsibly fulfill this role.
In some circumstances, it may be appropriate to consider the appointment of co-Trustees where you can nominate more than one person to share the responsibility of Trustee.  This may be nominating an individual person you know as well as a professional Trustee company. Another alternative is to nominate an Advisory Trustee. The Advisory Trustee assists the Trustee in decision-making, but the final responsibility still remains with the Trustee.
State Trustees’ specialist Trust administration staff are familiar with the diverse needs of Settlors and Testators and can structure a Trust to suit individual needs and act as a highly effective and totally impartial Trustee.

What are the responsibilities of a Trustee?
The Trustee has certain key responsibilities when governing the management and administration of Trusts.  These responsibilities are a statutory ‘code of conduct’ [also known as the ‘Prudent Person Principle’] administered in the state of Victoria. They require the Trustee to:

• be acquainted with the purpose and terms of the Trust;
• identify the Trust’s assets and manage them in the best interests of all beneficiaries;
• protect the Trust’s assets at all times [e.g. by arranging insurance cover, repairs, replacement or cleaning, bill paying];
• exercise as much care, diligence and skill that a prudent person would exercise in managing the affairs of other persons;
• comply with all accounting, reporting and auditing requirements;
• keep in touch with Beneficiaries and meet their needs;
• administer payments and transfer assets as appropriate; and
• comply with Trust Law and/or the terms of the Trust Deed.

A professional Trustee [such as a Trustee Company] has even more stringent requirements under the law for providing a responsible, quality, professional administration than is required of an individual. A professional Trustee Company is subject to regular internal and external audit processes. An individual is not.

Why choose State Trustees?
When it comes to setting up a Trust, you need to obtain the best advice that you can get. You should be
confident that the Trustee will always be around to carry out your wishes and ensure that your estate continues long after you have gone and provides financial protection for your Beneficiaries. As an enduring organisation with over 65 years’ experience, State Trustees offers:

Permanence. Unlike even the most reliable individual, State Trustees does not go on holidays or become
incapacitated.

Impartiality. State Trustees is independent, so can be relied upon to act objectively.

Experience. State Trustees deals with a wide range of Trustee, executor and administration services. Our
staff includes experts with specialised skills in legal and financial administration of trusts.

Compliance. When administering and investing Trust funds, we operate under the guidelines of the
Prudent Person Principle and with the assistance and advice of our professional Financial Planning team.

Customer service. We are committed to providing all customers with outstanding service.

Some important things to remember. . .
It is important that both you and your family are comfortable with setting up a Trust. Take some time to discuss your intentions with your family. Some of the important things you need to remember are:

• A Trust Deed cannot easily be changed, so it is important that you work with the right people to get it right the first time. If it may be desirable to change the Trustees in the future, it is important this is allowed for in the original Deed.
• A Trust set up whilst you are alive is sometimes referred to as a living Will because it makes it possible for you to plan how your assets will be passed to your children, grandchildren or other loved ones whilst you are still alive.
• Once you have transferred assets into a Trust, you no longer own them: the Trustee does on behalf of the Trust. If either you or your family has any concerns about your intentions, make sure you seek independent advice from a qualified professional.
• Make sure you choose your beneficiaries carefully. Remember that by considering a Discretionary Trust, there is the option to choose who receives the proceeds of the Trust on an annual basis.
• Trustees must be fully aware of their responsibilities.  For instance, they must keep the assets and liabilities of the Trust fully documented, making sure tax returns are lodged, financial reviews are conducted and any other necessary requirements are fulfilled. They can be sued if any of their decisions are negligent or fraudulent.

Consider having an independent, professional Trustee [such as State Trustees]. For a full explanation of the costs and actions involved in having State Trustees set up and administer a Trust on your behalf, ask us for more information including a copy of our Guide to Services, Fees and Charges.

For more information on Trusts, contact our Customer Service Consultants on 9667 6444 or complete our contact form.