Tue. Feb 11th, 2025

What is a trust, and why do you need one in Australia?

A trust is a legal structure that allows you to manage your assets in a way that provides benefits for you and your loved ones. It can help protect your estate and ensure your wishes are fulfilled after dying. While trusts are popular in Australia, many people don’t understand what they are or why they need one.

If you are considering setting up a trust, you can do so with Saxo Bank.

What is a trust, and what are the different types of trusts available in Australia?

A trust is a legal relationship between the trustee, the beneficiary, and the settlor. The trustee holds the assets on behalf of the beneficiaries and manages them in accordance with the terms of the trust. The settlor creates trust and can be either an individual or a company.

There are many different types available in Australia, but the most common are unit, discretionary, and testamentary.

Unit trusts are created by a deed that sets out how the assets will be held and managed. A solicitor or accountant usually prepares the deed. Discretionary trusts are created by will, and the trustee has discretion over how to distribute the assets to the beneficiaries. Testamentary trusts are also created by will, but the trustee does not have discretion over how to distribute the assets.

Why do you need a trust, and what are some of the benefits of having one?

You might need a trust for many reasons, but the most common is to manage your assets and protect your estate and investments. Trusts can be used to:

Provide for your family after you die- if you have young children, a trust can be used to provide for their needs until they reach adulthood.

Ensure that your assets are distributed according to your wishes- if you have specific instructions about how you want your assets to be distributed, a trust can help ensure that these wishes are carried out.

Minimise tax liabilities- trusts can be used to minimise the tax payable on your estate.

Protect your assets from creditors- if you are worried about losing your assets to creditors, a trust can help protect them.

How do you set up a trust?

Setting up a trust can be complex, and getting professional advice is crucial before proceeding. You will need to decide on the type of trust you want, appoint a trustee, transfer your assets into the trust, and prepare the necessary documentation.

It is also important to review your trust regularly to ensure it is still meeting your needs. You may need to make changes to the trustees, beneficiaries, or terms of the trust as your circumstances change.

The cost to set up a trust, and how often do you need to update it?

The cost depends on your type of trust and the complexity of your affairs. It is vital to get professional advice to ensure you set up the trust correctly and minimise the costs.

You will also need to pay ongoing fees for the management of the trust, which will vary depending on the size and complexity of the trust.

Reviewing your trust regularly is essential to ensure it is still meeting your needs. You may need to change the trustees, beneficiaries or terms of the trust as your circumstances change.

What happens if you don’t have a trust?

If you don’t have a trust, your assets will be distributed according to the laws of intestacy, and they will be divided between your spouse and children in a predetermined order.

If you have no partner or children, your assets will be distributed to your parents, brothers and sisters, or other relatives. If you’ve no relatives, your assets will go to the state.

Getting professional advice when setting up a trust or preparing a will is crucial. It will ensure that your wishes are carried out, and your assets are protected.

In conclusion

A trust is a legal arrangement that allows someone to hold and manage assets on behalf of another person. They can be used to protect your assets, minimise tax liabilities, and provide for your family after you die. Setting up a trust can be complex, and it is important to get professional advice before you proceed. However, there are plenty of resources online