The purpose of a trust
A trust is a legal arrangement. It's when a person or organisation is appointed to hold money or property on behalf of other people or organisations. The person holding the money is the trustee, and the people who benefit from the Trust are the beneficiaries.
You might choose to establish a trust for a variety of purposes or situations including:
- preserving and protecting assets
- tax planning purposes
- providing for children, or a person with impaired decision-making capacity
- giving to charitable causes
- business purposes
- operating and managing a self-managed superannuation fund.
There are several types of trusts, including:
- fixed
- unit
- testamentary
- discretionary
- charitable
- superannuation.
Choosing which type of trust that is right for you will depend on your goals and circumstances.
In Queensland, a trust can operate for a period of up to 80 years. The duration of the trust is usually set out in the terms of the trust and may end based on a specific event occurring.
The life of a charitable trust can extend beyond 80 years. This type of trust can continue to exist while there is still capital and income.
How a trust is established
Depending on the type of trust, its rules may be outlined in a trust deed or a Will.
A trust set up during your lifetime is called an inter-vivos trust. It may also be called a living trust. Inter-vivos trusts distribute property or assets to the beneficiary while you're still alive. The length of the trust is established when the trust is set up.
A trust written as part of your Will is called a testamentary trust. Testamentary trusts distribute property or assets to the beneficiary following your death. If a Will includes a trust, the role of the trustee starts once the role of the executor ends. Often the trustee is the same person as the executor.
The trustee becomes responsible for any assets held in the trust and will manage those assets according to the terms of the trust. These trusts can be set up for one or more beneficiaries and for a set period.
Get the right advice
The establishment and administration of a trust can be complicated. Every trust is different depending on your goals and needs.
When establishing a trust, you should consider seeking legal and financial advice to:
- find out the most suitable trust for your circumstances
- ensure all the necessary elements of the trust are covered properly in the documentation.
A legal professional can help you with Trust matters such as:
- advising you on whether a trust is suitable and the type of trust that will meet your goals and needs
- explaining how trusts work and how one can be set up
- drafting the trust deed and any associated documents
- collaborating with your accountant or financial advisor.
If you don’t already have a legal professional in mind, you can find one through the Queensland Law Society's You and The Law directory.