Setting up an Inheritance Trust Fund in Australia

Setting up an inheritance trust fund

Setting up an inheritance trust fund can be a great way to ensure that your loved ones are taken care of after you’re gone. But how do you go about setting one up? We’ll walk you through the whole process. 

Let’s get started!

What is a Trust Fund?

A trust fund is a legal arrangement in which property or assets are held by one party for the benefit of another. In Australia, trust funds are often used to manage money or property on behalf of children, disabled persons, or other individuals who cannot manage their affairs. Trust funds can be created by will, trust deed, or inter vivos trust agreement

The property or assets in a trust fund are held by the trustee for the benefit of the beneficiaries. The trustee has a fiduciary duty to act in the best interests of the beneficiaries and must exercise care, skill, and diligence in administering the trust. Trustees can be individuals or corporate entities such as banks or trust companies.

The beneficiaries have the right to information about the trust and its administration. They can also bring a claim against the trustee if they believe that they have not been properly advised, or that their rights have been breached.

What is a trust fund used for?

Trust funds can be a useful way to save for specific goals or purposes, including retirement planning and estate planning, and can provide benefits such as tax advantages and assets protection.

Basically, they’re just a way of saving up for something specific. The money in a trust fund is usually invested so it can grow over time. This means that when you come to use it, you’ll have more than you originally put in.

However, they also come with some risks and complexities that need to be considered before establishing one, which we will elaborate on as follows.

How to Set Up a Trust Fund?

A trust fund can be a great way to manage your finances and provide for your future. But how do you set one up? In Australia, there are a few things you need to do.

  • First, you need to choose who will manage the trust assets. This can be a family member, friend, or professional trustee.
  • Secondly, you need to decide what type of trust fund you want. There are many different types of trusts, so it’s important to choose one that best suits your needs.
  • Next, you will need to sign up for a Tax File Number (TFN) and an Australian Business Number (ABN), if you plan to transfer enterprise or business activities under the trust.
  • Finally, you need to set up a bank account and put the trust assets into the fund. This can be done by transferring money or property into the trust.

Once the assets are in the trust, they can be used to provide for your future needs.

Setting up a trust fund for a child

Setting up a child’s trust fund is a great way to provide for their future financial security. There are several different ways to set up a trust fund, but the most important thing is to make sure that the fund is properly managed and that the child‘s interests are protected.

  • First, you’ll need to choose a trustee. This can be a family member, friend, or professional trustee company.
  • Once you’ve chosen a trustee, you’ll need to open a bank account in the name of the trust. The money for the trust can come from a variety of sources, such as savings, investments, gifts, and inheritances.
  • Once the trust is established, the trustee will have complete control over how the money is managed and used.

However, it’s important to remember that trust funds are subject to certain taxes and fees, so be sure to seek legal advice about trust funds and tax before setting one up.

What Types of Trust are There in Australia?

Some common examples of trust funds in Australia include:

  • Discretionary family trusts (DFT)

DFT is a popular way for families to manage and control their assets. A DFT is a type of trust that gives the trustees the discretion to distribute income and assets to beneficiaries. This means that the trustees have flexibility in how they manage the trust, and they can take into account the changing needs of the beneficiaries.

  • Fixed trusts

A fixed trust is a type of trust where the beneficiaries, trustee, and terms of the trust are all determined upfront and cannot be changed. This type of trust is often used when people want to pass on their assets to specific people or charities, as it provides more certainty than a discretionary trust.

  • Fixed unit trusts

It is very similar to fixed trusts, but there is one main difference. A fixed unit trust is a type of trust fund where the trustee invests in a fixed number of units. The units are then traded on a stock exchange, and the value of the fund will fluctuate based on the price of those units.

  • Testamentary trusts

A testamentary trust is a type of trust that is created by a will. Testamentary trusts are commonly used in Australia to help manage the estate of a deceased person and ensure that their assets are distributed according to their wishes. 

In these cases, ​​there are numerous procedures that must be followed in order to administer their assets. Obtaining a grant of probate is sometimes one of them.

  • Special disability trusts

In Australia, a special disability trust (SDT) is a type of trust established for the primary purpose of providing financial benefits and support to a person with a severe disability. SDTs can be used to build up savings or to pay for items and services that improve the quality of life of a person with a disability.

  • Charitable trusts

Charitable trusts are typically set up to provide funding for charitable organizations or causes. The funds for the trust come from donors, and the trust is managed by trustees who are responsible for ensuring that the money is used in accordance with the wishes of the donors.

In Australia, there are more than 600,000 NFPs, with approximately 5,000 of them being trusts, foundations and ancillary funds. Before setting up a charitable trust and donating your savings to a good cause, get familiar what the top 10 not for profit organisations in Australia.

  • Superannuation proceeds trusts

These types of funds are used to manage and distribute the proceeds of a person’s superannuation (retirement savings). The trustee of the trust (usually a financial institution) is responsible for investing the money and managing the assets. The beneficiaries of the trust are typically the members of the person’s family.

To learn more about how to make it easier for people to keep track of their retirement savings read this helpful Guide.

Bottom Line

An Inheritance trust set-up can be a great way to ensure your loved ones are taken care of in the event something happens to you. But it’s important to plan ahead and make sure you set everything up correctly. We hope this article has helped give you a better understanding of how family trusts work in Australia and how you can go about setting up an inheritance trust fund for yourself.


1. Do you pay tax on inheritance?

In Australia, you generally don’t have to pay any tax on money or property that you inherit from a deceased person. There are some limited exceptions to this rule, but Inheritance Tax is not a major concern for most Australians.

2. Is it worth setting up an inheritance trust fund?

Yes, it is worth setting up a family trust in Australia. A family trust can help reduce your tax liability, and can also help protect your assets from creditors. Additionally, a family trust can be a great way to provide financial security for your loved ones in the event something happens to you.

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