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Inheritance Trusts

 
What is an Inheritance Trust?
An Inheritance Trust differs from a traditional family trust in that it does not receive the bulk of its assets until the death of the Settlor, at which point the assets are transferred to the trust via the Settlor's Will. An Inheritance Trust is specific to the individual who would otherwise inherit under your Will, so you may have several Inheritance Trusts, one for each child.
How is an Inheritance Trust set up?
When setting up an Inheritance Trust you decide what happens to your assets in the future and set out in the trust deed:
  • the purpose of the trust
  • what assets will be transferred into the trust
  • who will benefit from the trust
  • who will act as trustees
  • the terms and conditions for administering the trust
  • the name of the trust.
When the trust deed is signed an initial sum of $50 is put into the trust, this becomes the "trust fund", and the remaining assets are transferred by your estate. There is currently no death duty and there are not the gift duty implications associated with a family trust. At your death your assets are fully transferred into the trust and there is no complicated gifting programme.
Who should I appoint as trustee?
This is an important decision. An Inheritance Trust will generally acquire its assets after your death, so it is important that you have an independent trustee who will be in a position to ensure that the trust is correctly run. A trustee company such as Perpetual Trust is ideally positioned to fulfil this role as a company will not die, retire or go on holiday.
What happens if the law changes?
If a law change defeats the purpose, a trust can be re-settled to restore the benefits of the trust if the deed allows it.
Do I have control over trustee's decisions?
A trustee must act independently and impartially. You can ensure that the trust is administered according to your wishes by careful drafting of the trust deed and including a memorandum of wishes. You can give investment guidance in the trust deed, but under the Trustee Act, trustees must take a "prudent person" approach to investment. A trustee cannot be made to do what the deed and the law do not permit.
How much does it cost to set up an Inheritance Trust?
Often mulitlple Inheritance Trusts are set up at the same time. They are usually all similar as they are set up for your clidren and have the same goals. So the cost is progressively cheaper as more trusts are established:
  • $800 plus GST for the first trust
  • $550 plus GST for the second trust
  • $300 plus GST for the third trust
  • $250 plus GST for any additional trusts
i.e. to set up four trusts will cost $1900 plus GST. There are no ongoing maintenance costs with an Inheritance Trust until it acquires assets. At this point the costs are the same as for a traditional family trust.

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