Are you wondering when, and why, you should form a trust?
There are several different options to consider when the time arises.
Firstly, a trust allows you to provide for future generations – children, grandchildren or any other person. Assets transferred to the trust can be distributed on the basis, for example, of reaching a certain age, or attending a certain academic institute.
The distribution of assets held on trust may not be contested in the same way that gifts under a Will may be under the Family Protection Act 1955. Assets may also be protected from being caught up in any relationship property disputes with your spouse or de facto partner, depending on the timing of the creation of the trust and the relationship specifics.
A trust can also be created to protect your assets from any liability you may have as a Director of a company, in providing a guarantee or security for the company. If you are considering forming or purchasing a company, then transferring your personal assets to a trust can guard them from any possible future problems with creditors.
By separating yourself from the legal ownership of your assets, they may no longer be considered when it comes to calculating your entitlements to certain benefits and subsidies that require asset testing, such as the Residential Care Subsidy. There is no guarantee of this however.
It is important to keep in mind that your primary purpose for establishing a trust must not be to transfer assets to defeat creditors or spouse’s/partner’s claims, avoid asset or means testing or to avoid or reduce your tax liabilities.