Trusts are a vital aspect of the estate planning process. They allow you to protect the inheritance of beneficiaries who cannot manage their wealth. The extract below discusses the various considerations you should make when creating trusts.

When To Consider Trusts

Trusts are an ideal choice when you need a beneficiary to meet specific requirements before receiving their inheritance. For instance, you may want your kids to reach 18 years before they can inherit property.

Creating a Trust

Your wills and estate lawyer will help you create the trust. Typically, you will need a trust deed detailing the purpose of the trust, membership, and the process of paying benefits. The trust deed must be dated and signed by trustees and the settlor. Your wills and estate lawyer will ensure the document abides by state laws.

To settle the trust deed, the settlor pays a $10 settlement sum to the trustee. You will then apply for stamp duty, a tax file number and Australian business number. After this, you can freely open a bank account and transfer property to the trust. 

Types of Trusts

Below are the various types of trusts in Australia:

1. A family or discretionary trust empowers the trustee to decide when and how to make payments to the beneficiaries.
2. In a unit trust, each beneficiary has a specific number of shares. Annual payments are based on a beneficiary's shareholding. As such, the trustee is powerless in this kind of trust.
3. A hybrid trust combines features of the discretionary and unit trust. The trustee makes payments to each beneficiary based on their number of shares.
4. A bare trust is one where the beneficiary has complete control over the trust. They can decide when and how to receive payments.
5. Charitable trusts are meant for people that wish to leave some of their wealth to charity organisations. If the trust has a gift deductible status, the charity organisation must seek public funds before receiving money from the trust.  

Choosing a Trustee

A trustee can be a close family member or friend. They should be someone you trust and one that can prioritise the needs of the beneficiary. You may also opt to deal with a law firm or corporate body that manages trusts. If this is the case, conduct some due diligence to know how much they will charge to manage the trust. 

Work with an experienced wills and estate lawyer when setting up trusts for your beneficiaries. The lawyer will advise on a suitable type of trust. Besides, they will help you update the trust deed as situations change. Contact a wills and estates lawyer today to learn more.