Estate planning is shifting to meet today’s more complex family dynamics. Over the past 15 to 20 years, we have seen a steady rise in the use of testamentary trusts in Wills. These structures offer flexibility and protection, especially for testators navigating blended families, supporting children with addictions or mental health challenges, or planning for loved ones with disabilities.
Each situation calls for a tailored approach, and no two trust structures look exactly alike. That’s why crafting a plan that reflects your unique family circumstances and objectives is essential.
Supporting your children while protecting your wealth
Helping children with major milestones, such as buying their first home, is common. But safeguarding family wealth from risks like bankruptcy or relationship breakdowns is just as important. Options include:
- Legally binding loan agreements with or without registered mortgages.
- Carefully structured family trusts.
These options allow you to lend a helping hand without putting long-term family finances at risk.
Trust fundamentals — what clients should know
A trust is a legal relationship between a trustee and beneficiaries. It doesn’t have its own legal identity but relies on the trustee to authenticate the legitimacy of the entity. Most trusts are established by a trust deed, setting out who the trustee is, the beneficiaries, the terms, and the vesting date.
Trusts can be established in two ways:
- An inter vivos trust: established during the settlor’s lifetime.
- A testamentary trust: established after the death of the will maker, as part of a Will.
Each offers distinct advantages depending on the timing, goals, and financial landscape.
Key elements of a trust include:
- Settlor: the person who establishes the trust and provides initial assets.
- Trustee: the legal holder of the assets who administers and manages trust assets according to the terms of the trust.
- Beneficiaries: those who benefit from the trust, either through fixed or discretionary entitlements, either income, capital or both.
- Trust fund: includes all of the assets held by the trust, including the original corpus and future contributions.
- Appointor (optional): the person who effectively controls the trust because they have the power to appoint and remove the trustees and oversee their conduct.
Trusts are unique structures which can serve many purposes such as:
- Preserving wealth for future generations.
- Succession planning.
- Supporting vulnerable family members.
- Asset protection.
- Tax optimisation.
- Disentitling individuals.
Will vs. Trust — understanding the difference
Both a Will and a trust are legal tools used in estate planning—but they serve different purposes:
- A Will outlines how assets are distributed upon death, with executors managing the process. Once the estate is distributed to the nominated beneficiaries, the job of the Will is completed.
- A trust has the ability to operate for many years, and in Victoria, the perpetuity period is 80 years or the life of a specified person plus 21 years, while charitable trusts have no perpetuity period and can exist indefinitely. It is an entity to manage assets for the benefit of beneficiaries, while a Will is a document that is used to dispose of assets.
If a Will includes a testamentary trust, the executor distributes assets to the trustee, who then manages them on behalf of the beneficiaries, per the terms of the Will.
Timeline — how quickly can a trust be created?
Trusts can generally be established within a few days, depending on the complexity. Once the trust deed is signed by the settlor and trustee, the trust exists. In states like Victoria, stamping by the State Revenue Office is required within 30 days of signing, with applicable duties paid. Until the trust deed is stamped, additional assets should not be purchased or transferred to the trust, as this could result in additional stamp duty.
Case study — protecting assets from disputes
A client wanted to leave his entire estate to one child and was concerned about the risk of challenges by his other children after his passing. To give him greater protection and certainty, we helped him set up a discretionary trust during his lifetime, which limited the class of beneficiaries and transferred most of his wealth (which were liquid assets) into the trust.
What this achieved
- The other children were excluded as beneficiaries, removing any rights they may otherwise have had to challenge or raise questions with the trustee.
- No capital gains tax or stamp duty applied because only cash was transferred.
- Control of the trust moved straight to the child the client intended.
- The structure couldn’t be contested after the client’s death.
This approach gave the client confidence that their wishes would be carried out exactly as intended, without disputes or complications, and provided real peace of mind.
Contact us
Our Wills, Trusts & Estates lawyers work closely with families to develop customised estate planning solutions, including trust structures that reflect their unique circumstances. If you would like advice on legacy protection, family support, or future-proofing your wealth, please contact a member of our Wills, Trusts and Estates team.
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