Inter-Vivos Trust

What is an inter-vivos trust?

An inter-vivos trust is set up during your life to manage assets or investments and support beneficiaries, such as family members.

A trust deed includes the instructions and rules for the trust instead of a will. The trusts manage assets for the beneficiaries.

In some cases, generations of a family may be beneficiaries of an inter-vivos trust without having to go through the administration of an estate after someone has died.

Can you set up a life-interest benefit through an inter-vivos trust?

A life-interest benefit means that a person can benefit from an asset for the rest of their life, however, they won’t actually inherit it. For example, a trust may allow a beneficiary to live in a property, earn interest on invested money, or receive rental income from a property for the rest of their life.

You may wish to set up a trust to manage funds for the rest of your own life. This means you don’t have to worry about investing and managing those funds.

Who can be trustee?

A family member or a friend who is over 18 years of age and an Australian resident can be a trustee. You can also choose a trustee company, such as State Trustees, or a legal, accounting or financial planning organisation. Or, you may want to name yourself as trustee or co-trustee.

The trustee is the legal owner of the trust assets. They must manage the assets in the best interests of the beneficiaries.

What assets can be part of the trust?

There are many types of assets that can be held in trust, including:

• investments
• land or property
• cash
• other valuable belongings, such as paintings, furniture, or jewellery.

The money and investments that the trust holds are also called trust capital. This capital can make income, such as interest on investments or dividends on shares. Assets may also go up in value, meaning that the trust gets capital gains.

Who owns the assets in the trust?

Once the assets are in the trust, you no longer own them. The trustee is the legal owner of the assets and manages these to benefit the beneficiaries. However, you may want to be the trustee at first to make sure the trust is set up and run how you want it.

When can the trust assets be distributed?

The trust deed includes instructions about when the inter-vivos trust assets can be distributed. Assets can be distributed at any time in line with these instructions and the reasons that the trust was created. This can mean distributing the income of the trust to family members in a tax-effective way for many years. It might also mean giving funds from the trust to the beneficiaries when they will benefit from it the most, such as when they are buying a home.

How long can the trust run?

The trust will end at a time, or when an event happens. You will specify this in the trust deed. For example, you may end the trust:

• when the main beneficiary dies
• once all beneficiaries are over a certain age
• when it has been 80 years since the trust was set up.

When the trust ends, the assets that are left can be distributed to family members or charities. This will depend on what the person who set up the trust wanted. These rules will be included in the trust deed when the trust is set up.