When Should You Consider a Trust

A Trust can be an invaluable piece of your estate plan puzzle, particularly if you’re aiming to ensure that the wealth you’ve accumulated goes to the right people for the right purposes. As family dynamics become more complex, families become more global, and our wealth becomes more widespread, it’s important to think about how this impacts your estate planning, and how you might like to see your wealth distributed to your future generations.

This is something that is often ignored by far too many Australians, so this week our team at Ally Wealth Management is exploring some of the key benefits and reasons that you might want to consider a Trust as part of your Estate Planning. We’re consistently alarmed by the number of Australian families that don’t have a Will in place, so we know that there are far too many who are not considering Trusts or their overall estate plans. A recent study by Maurice Blackburn actually found that around 40 percent of Australians have no idea what would happen to their assets if they were to pass away.

That’s pretty terrifying

Let’s dive into how a Trust might be a sensible consideration as part of your estate plan.

Firstly, what is a Trust?

A trust is simply a structure that is created via a trust deed to manage some assets that have been created or come about via the trustees, for the future benefit of the beneficiaries. Providing that the trust deed is created and meets the legal requirements, then it is binding upon the trustee to act in line with the objectives and rules of the trust deed. This includes how any and all benefits are to be paid to the beneficiaries of the trust.

There are many types of trusts that you can consider for both Australian residents and expats, and we’re not going to go into detail about all of them in this update, but just to acknowledge that there are many considerations. Some of the options include; testamentary trusts, discretionary family trusts, unit trusts, special disability trusts, bloodline trusts and even superannuation proceeds trusts.

Setting up a trust in Australia is a relatively straightforward process, however is certainly an area that appropriate advice should be sought, given that it can have significant tax implications now and in the future.

Now, let’s consider why you should consider a Trust set up.

In many cases, the primary driver for setting up a Trust has been to minimise the tax implications, however there are a number of other key benefits, which we’ll explore below:

Asset Protection

A Trust allows you to protect and control how your assets are distributed to your intended beneficiaries. This allows you to ensure that it will be provided to them with the greatest benefit. For example, you may wish to ensure that only a certain amount of income could be drawn each year, or that it can only be used for the education of your grandchildren for example. You may also wish to ensure that certain assets can not be sold and are to remain part of the estate and Trust for the benefit of future generations.

This can be particularly handy if you have young children as most parents would not want them to be in receipt of large sums of money should something unexpected happen to the parents. This is where something like a Testamentary Trust can come in and provide a pivotal role in the overall financial plan.

Covering Education Costs

In a similar manner to the Testamentary Trust example mentioned above, having a Trust set up can ensure that if something were to happen to both parents, that the assets in your Estate can be used to cover the future education costs of your children. If you wish for your children to attend private school, or universities across the globe, then this could be a very sensible structure to put in place.

Avoiding Disputes Amongst the Family

Over the years, there have been many high profile cases of family disputes about the estates of deceased famous individuals. In many cases, they’ve failed to adequately document their wishes and ensure that they were protected from an estate planning viewpoint. This often happens amongst everyday individuals also, and can be a particularly stressful time for all involved.

With a trust set up, this can be averted be minimising the potential for conflict amongst family members. If you’re part of a more complex family structure, a Trust can often offer a lot more control and flexibility than a Will, particularly when it comes to the ongoing treatment of certain assets. This can also be particularly helpful for assets that may not be able to be easily split up, such as property, an art collection or otherwise.

Avoiding Probate

Finally, another key benefit of a Trust is that it allows for probate to be avoided, which can be a costly and tedious process, as anyone who has been through it will attest to. First, the Will must be deemed to be valid before the estate can be distributed, and even after this has been done, it can take months, and in some cases, even years, for an estate to be distributed. For a simple estate, the process is usually three to six months, so this can be quite a drawn out process without the proper planning in place.

A Trust allows you to bypass the estate, speed up this process, and make everyones’ lives easier when it comes to administering the estate.

There are many key benefits to Trusts when it comes to your Estate Planning, but given the options available and the implications, it’s important to seek professional advice and ensure that you’re setting up the right trust for the right purpose.

Ally Wealth Management is the trusted ally in finance for Australians at home and across the globe. As both Australian expats and residents, the founders of Ally have a unique understanding of the common personal financial challenges faced.

Book your complimentary appointment with our team at Ally Wealth Management to discuss how we can help you to achieve your financial goals.

Ally Wealth Management Pty Ltd is a Corporate Authorised Representative of Sentry Advice Pty Ltd ABN 77 103 642 888. Sentry Advice holds an Australian Financial Services Licence (AFSL) No. 227 748.

General Advice Warning: The information contained herein is of a general nature only and does not constitute personal advice. You should not act on any recommendation without considering your personal needs, circumstances and objectives. We recommend you obtain professional financial advice specific to your circumstances.