Types of trusts
Trusts are created for a variety of reasons. They can provide on-going support for a beneficiary under your will, benefit a charity or assist in tax effective estate planning.
What is a trust?
A trust is a legal relationship where one person or organisation, called the trustee is responsible for safeguarding assets for another person or organisation, called the beneficiary.
How do trusts work?
Generally trusts are established by a will or a deed that sets out the terms of the trust and specifies:
- Who can receive benefits from the trust (the beneficiaries)
- What assets are to form the trust
- When the beneficiaries can receive benefits from the trust
Types of trusts
State Trustees can provide guidance and assistance to help you choose the best type of trust for your needs.
Two common types of trusts are “living trusts” and “testamentary trusts”. A living trust or an “inter-vivos” trust is set up during the person’s lifetime. A testamentary trust is set up in a will and is established only when the will goes into effect.
The most common trusts types are:
- Testamentary Trust: established by your will to manage your estate’s assets and income for your beneficiaries after you die.
- Minor’s Trust: designed to manage and protect assets for a child until they reach a specified age.
- Inter-Vivos Trust: set up during your lifetime to support beneficiaries, such as a family member with disabilities.
- Injury or Compensation Trust: usually established by legislation or a court decision and designed to protect and manage money paid in compensation for the beneficiary’s injury, such as WorkCover or TAC.
- Superannuation Minor’s Trust: established after you die to leave a share of your superannuation to a child.
- Special Disability Trust: set up to help immediate family members and guardians provide for the future of children with a disability.
- Charitable Trust: designed to provide on-going benefit to eligible charitable organisations or charitable purposes.
Duties of the Trustee
A trustee has many duties and obligations which they need to perform, these include:
- act in the trust’s and beneficiaries’ best interest.
- identify and protect trust assets.
- provide outcomes that balance beneficiarie’s wishes with any rules or constraints contained in the trust authority (the will, trust deed or court order and the law).
- distribute trust assets in accordance with the trust authority.
- provide financial reporting on the trust’s assets and distributions.
- maintain records to show compliance with the trust authority and the law.
If you are an existing trustee and unable to continue to act or no longer wish to perform the duties required of the role, you may be able to transfer these responsibilities to State Trustees.
We can relieve you of the obligations of a trustee and assume responsibility of the trust.
Contact us to discuss your circumstances.