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The role of trusts

Protecting your assets during your lifetime and beyond

How does a trust work?

A trust is a structure that holds assets together with the aim of growing and protecting them. When a trust is established, the assets are given to a trustee who manages them and distributes any income earned to the beneficiaries of the trust (one of whom can be you). You can establish a trust during your lifetime or via your will.

How can a trust protect wealth?

A trust is usually created for a specific purpose and with specific instructions as to how it is to be managed. For this reason, a trust can be very useful to protect assets for estate planning, taxation or other purposes. The following examples show situations where a trust may be useful.

To provide for your family members now or in the future

  • Tom sets up a trust that provides his wife and children a regular income. This can continue after he dies. This protects his assets so they can grow and produce income over the long-term.

To ensure the financial security of someone who needs special care

  • Rachel has an adult son with a disability. She creates a trust that will provide her son with a regular income after she dies. This protects the assets from being used all at once so that her son’s lifestyle and special needs can be maintained.

To better manage how your estate is taxed

  • Matthew establishes a trust via his will to provide for his grandchildren. He puts instructions in place to alter the distribution of any income as his grandchildren reach certain ages and enter new tax brackets. This will protect the assets from being unnecessarily eroded by tax.

To protect assets should a beneficiary experience personal misfortune

  • Jane establishes a trust to provide for her child, but not their spouse in the case of divorce. This can protect the assets from passing to the wrong hands.

 To control how and when beneficiaries receive any inheritance

  • Gareth’s daughter has a gambling addiction. His trust stipulates that his daughter receives a small but regular income from his estate rather than a large one-off inheritance. This protects the inheritance from quickly being spent.

 To provide an ongoing gift to the community

  • Joe wants to support underprivileged children. He sets up a charitable trust so he can provide income to a number of charities every year. This continues after he dies. If he had made a one-off charitable donation, his capital would be gone forever.

 To safeguard a compensation payment

  • Bob receives a compensation payment after an injury at work. A trust safeguards and invests the money so that it provides an income to meet his long-term lifestyle needs. This protects the money from being used all at once or from being slowly diminished.

Financial advice is important

A trust can be a beneficial estate planning and wealth protection tool, however we recommend that you speak to a financial adviser about your situation. An adviser can help you determine how best to protect your assets and can advise on trust types and strategies.

What’s next?

Perpetual or Perpetual Group means Perpetual Limited, ABN 86 000 431 827, and its subsidiaries. Perpetual Private Clients advice and services are provided by Perpetual Trustee Company Limited (PTCo), ABN 42 000 001 007, AFSL 236643. This information has been prepared by Perpetual and contains information contributed by third parties. It contains general information and is not intended to provide you with advice or take into account your objectives, financial situation or needs. You should consider whether the information is suitable for your circumstances and we recommend that you seek professional financial, tax and/or legal advice. The information is believed to be accurate at the time of compilation and is provided by Perpetual in good faith. However, the statements including assumptions and conclusions are not intended to be a comprehensive statement of relevant practice or law that is often complex and can change. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information.

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