Here at Cameron Rogers, we often see clients mistakenly confuse a trust and an estate plan as being the same thing. Although both are the two main legal structures for transferring assets to your beneficiaries, they have completely different purposes and work in critically different ways.
In this article, we explore the key differences between a trust and an estate plan so you know how they can benefit your individual situation or circumstance.
What is a Trust?
A trust is a legal entity which holds and distributes assets and other decisions during your lifetime according to certain conditions. The individual who creates the trust, who is known as the “grantor”, can establish these conditions largely at will to give the “trustee” the authority to manage, invest, and safeguard trust property and income after you pass away.
There are 5 common types of trusts in Australia, and it’s essential to know the differences so you can decide which one is best suited to your individual situation.
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- Fixed Trusts provide for a specific proportion of assets to be distributed to specific beneficiaries.
- Discretionary Trusts give trustees the power to decide when, how much, and to whom to distribute assets.
- Hybrid Trusts have characteristics of both a fixed trust and a discretionary trust, giving the beneficiaries the best of both worlds.
- Testamentary Trusts are established per the deceased’s will, so it only comes into existence upon their passing.
- Special Disability Trusts are established to help immediate relatives and guardians provide for the future family members who have a disability.
What are the benefits of a Trust?
Forming certain types of trusts offer the advantages of avoiding the probate process, as in some cases it may protect your family from creditors. Trusts also allow you to limit when beneficiaries have access to your assets.
What is an Estate Plan?
A trust is only one element of your estate plan. A comprehensive estate plan includes not only a trust, but also a last will and testament, beneficiary designations, and a power of attorney. It is typically a set of legal and financial documents that accomplishes several important goals, and includes a strategy for how your assets should be distributed after you die. These assets can include everything from your home and savings accounts, your car, furniture and other personal belongings.
It’s important to note that your super balance and insurance proceeds are not part of your estate by default and will need to be considered separately.
How can an Estate Planning Lawyer help?
If you pass without any will, trust, or estate plan, your assets may not be distributed the way you wish. Additionally, as your life changes, it is essential to review and update your estate plan accordingly.
Seeking legal assistance for your Estate Planning requirements is critical to ensuring your plan lines up with your goals and circumstances. The team at Cameron Rogers are skilled in guiding clients through the complicated process so they know their transfer of wealth is in safe hands.
If you have any estate planning questions, or are ready to create a trust, will, or estate plan, we will personally guide you through the process and keep you informed every step of the way. Contact us now on 07 5445 1213 or book a consultation.
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