When establishing your estate plan, there are many different ways you decide to distribute your estate. Setting up trusts is a way to specifically provide for a beneficiary or organization, and also to minimise taxation of your estate.
In essence, a trust is a way to pass ownership of property from one person to another. They can be used in estate planning to provide for children from a previous marriage, a spouse or child who is disabled, or to reduce tax on your estate. In addition, trusts are often used when someone wants to make a bequest to a charity or not-for-profit organization.
The two main types of trusts are as follows:
- Testamentary trusts: these are created upon the death of the person who set it up. They are usually established under a will.
- Inter vivos trusts: also known as a “living trust”, these are created during the person’s lifetime, and come into effect immediately upon their creation. These do not form part of an estate, and so are not subject to estate administration tax (probate fees).
It is important to seek professional advise when setting up a trust. If you have any questions, contact Estate Law Group.