— Trusts can be established for a variety of reasons
What is a Trust?
Trusts are a powerful estate planning tool which may provide a greater level of protection, passing them on in a way that is most appropriate to your beneficiaries.
Trusts Act 2019 now in force
Recent changes to Trust Law now means there is greater transparency around trust activity and greater compliance placed on trustees.
If you are a trustee, or thinking about establishing a trust it is important that you know about these changes and what they mean.
No trust should be set up without proper advice or an assessment of the impact of the trust on your overall position. We will look at your personal circumstances, your legal obligations, any dependants, your assets and liabilities and your future intentions with regard to your lifestyle and who may inherit your assets.
It is important that the trust is flexible, and yet has rules in place to ensure legality. A properly established trust cannot be contested in the same way as a bequest under a will, a trust gives the settlor greater certainty that his/her wishes will be acknowledged.
Therefore it is essential you choose a trustee with specialist knowledge, continuity and reliability. As specialist trustees we offer comprehensive advice and a number of trust structures to cater for a wide range of circumstances.
Some reasons you may consider establishing a trust include:
1. Safeguarding your assets
A trust may help protect you and your family against personal and business-related creditor claims or may assist with protecting personal property.
2. Avoiding claims against your estate
A properly established trust such as an inheritance trust, cannot be contested in the same way as a gift under a Will, which gives greater certainty that your wishes will be implemented.
3. Taxation planning
An incidental result of a trust owning income-earning assets is flexibility of tax treatment for a range of beneficiaries.
4. Providing for dependants such as children and grandchildren
You can establish a trust for a specific purpose such as education, or if you have loved ones with physical or other disabilities.
5. To provide for your funeral costs
You can relieve some of the financial burden on those closest to you by establishing a funeral trust to cover or contribute towards your funeral expenses. Find out more about Funeral Trusts below.
6. Provide long-term support to charity
Create a lasting legacy to a cause that you are passionate about. A charitable trust will ensure a regular income will be given to your charity and administered wisely in accordance with your wishes. Find out more about Charitable Trusts.
Funeral Trusts
A bereavement and the funeral that goes with it will affect your loved ones – both emotionally and financially. An overwhelming number of decisions need to be made quickly and often under a high level of stress. Even more difficult, is the added financial impact of having to pay for funeral arrangements – often at short notice.
Funeral expenses can range from around $5,000 to over $15,000; depending on the nature of the funeral you choose to have. They are often a family’s third largest expense after paying for a house or car.
What is a Funeral Trust?
A Funeral Trust is designed to cover, or contribute toward, the cost of your funeral expenses. Money that is deposited into a Funeral Trust by you cannot be withdrawn until after you pass away (unless you permanently migrate overseas). So, you can be assured that the money you have put aside will only be used to contribute toward the payment of your funeral expenses.
Funds are then available to be paid out to either the funeral director or the person who produces evidence that your funeral expenses have been paid by them.
Any balance remaining that is not required to meet your funeral expenses will be forwarded to the person administering your estate for distribution in accordance with your Will.
Why would you set up a Funeral Trust?
Asset testing exemption
If you wish to receive the residential care subsidy, you are required to have a financial means assessment. This assessment includes an assets and income test. Currently up to $10,000 of any pre-paid funeral of a person or their spouse is exempt from the assets test and any interest generated from the pre-paid funeral amount is exempt from the income test. Therefore, you can set aside up to $10,000 for your funeral and still qualify for the residential care subsidy.
What will it cost?
The minimum initial contribution to establish your Funeral Trust is $2,000 and an establishment fee of $150 is applied.
There is no maximum amount that you can hold in your Funeral Trust, although asset testing may apply to amounts over $10,000. You can continue to add to your Funeral Trust with minimum deposits of $1,000 at a time, or alternatively you can set up a direct debit authority for making smaller contributions more regularly.
