A question our customers frequently asked us is: should I consider using a trust to hold and manage my assets? We explore some of the advantages of a trust, which might assist to answer the question of whether a trust is a good idea for you.

The issue

Is a trust worthwhile for holding and managing your assets? Or will it be a waste of money and add unnecessary complexity?

The answer: It depends.

What it depends on are your finances, income, job risk, family situation and future plans. Set out below are some of the advantages of a trust, which might assist to answer the question of whether a trust is a good idea for you.

The basics

Most people are familiar with the basic idea of a trust. Essentially, a 'trustee' holds assets (this can be real estate, shares, cash, a business pretty much anything) in the trustee's name for the benefit of someone else. Even though the trustee is registered as the owner, they are not the 'real' owners. Eventually the assets of the trust must be distributed to the real owners, along with any income that is earnt from investment of the trust assets.

Advantages of a trust

There are many advantages of a trust but, in summary, the key benefits are:

Tax planning if you hold assets in your own name then income earnt from these assets will be treated as your income and will be taxed at your marginal tax rate. When using a type of trust known as a 'discretionary trust' you can potentially share the income among multiple people, often family members who may have lower tax rates, but also to charities and the like.
Asset protection trusts allow you to minimise the risk that your assets might all disappear because of one bad business or personal decision. A properly structured trust can protect assets against bankruptcy and family law claims or, conversely, if it is the trust that is facing the risk (e.g. a struggling business), then this can limit the loss caused to you personally by you not losing your own personal assets.
Succession planning when a person dies, assets in their name are generally frozen and can take some time to administer. A trust does not die with any one individual. Provided the trustee is carefully selected, a trust can continue to operate uninterrupted even when a key person dies.

Once established, trusts often do not have any significant costs to operate. You might have some accounting costs for an annual tax return or for advice on tax effective distributions from time to time.

It should be noted that the best time to start a trust is at the commencement of any new enterprise or investment. Once you already have a successful business or large investment portfolio, significant tax or other costs may be triggered by moving assets into a trust structure.

Setting up a trust itself is not difficult. It's the acquiring of the money and or assets to put into a trust that is the hard work!

How can we help?

We assist customers regularly with business planning and trusts, both simple and complex. Please feel free to contact our Wills and Estates team on 1300 205 506 if you have any queries or would like more detailed advice in this area.

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The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

Liability limited by a scheme approved under Professional Standards Legislation.

Written by a member of our Legal Team

Mitchell Zadow

For further information contact

Mitchell Zadow

Mitchell is the Managing Principal of our law practice.

He is an Accredited Specialist in Commercial Law (accredited by the Law Institute of Victoria). He also deals with areas of Employment Law, Wills & Estate Planning and Probate. For further information, contact Mitchell on his direct line (03) 8561 3318.

Taxes and deceased estates

Can I refuse to act as an Executor?

How does separation affect a Will?

A question our customers frequently asked us is: should I consider using a trust to hold and manage my assets? We explore some of the advantages of a trust, which might assist to answer the question of whether a trust is a good idea for you.

However, in this article we will set out the factors that influence how long it will take to obtain a Grant of Probate and to administer an estate in Victoria.

The basics

First things first: what is a Grant of Probate? A Grant of Probate is effectively a document issued by the Supreme Court of Victoria which formally authorises an executor to manage the estate of a deceased person in accordance with their Will. Without Probate, the asset holders (say a bank or share registry) cannot be satisfied as who has the correct authority to receive the deceased's assets and may refuse to pay out.

Sometimes, for smaller estates or if assets are mostly jointly owned with a surviving spouse, asset holders might agree to release payment without requiring a Grant of Probate. This is usually on the basis that the person who receives payment promises to repay (or Indemnify) the asset holder if it turns out they paid to the wrong person.

If there is no Will, then you cannot obtain a Grant of Probate. Instead you obtain Letters of Administration. This is effectively the same, in terms of authorising someone to administer the estate, and would usually be obtained by the person who is the closest next-of-kin to the deceased.

“A Grant of Probate is effectively a document issued by the Supreme Court of Victoria which formally authorises an executor to manage the estate of a deceased person in accordance with their Will.”

Timeframes for Probate in Victoria

In order to obtain a Grant of Probate, the Supreme Court needs to be given information about the assets and liabilities of the estate, the deceased person, the witnesses to the Will, the executors and the Will itself. An advertisement of your intention to apply for Probate must also be published on the Supreme Court website for at least 14 days prior to any application being lodged.

Often, making enquires to obtain all the necessary information can take a number of weeks. Also, you will need the Death Certificate for the application for Grant of Probate and possibly for making proper enquires regarding the assets and liabilities. Waiting for the Death Certificate to issue can therefore add a few more weeks to the process. Overall, if you have your application for Grant of Probate lodged within 1 to 2 months from the date of death, you are making timely progress.

The Court itself usually does not take long to process the application (maybe another 1 to 2 weeks) and this is completed using the electronic Supreme Court filing system. This means you do not have to go to a Court hearing. The timeframe for processing applications for Letters of Administration is even less, given that there is no Will document for the Court to consider. There is also a general discretion for the Court to raise a 'Requisition' asking for more information before they review the application - this can sometimes delay matters.

“Overall, if you have your application for Grant of Probate lodged within 1 to 2 months from the date of death, you are making timely progress.”

So, here we are a few months after death and you finally have a Grant of Probate or Letters of Administration. It is important to remember that this is the start of the estate administration and not the end. For a very simple estate, you might only need a further month or so to cash the assets and pay them to the correct beneficiaries. However, it can often be more complex than that. Factors that determine the timeframe to administer the estate include:-

Some assets will take time to cash or transfer. For example, if selling a property, final settlement might be 60/90/120 days from the day of sale.
There is a 6 month period for challenges to be brought against the estate and executors must wait until this period expires before distributing the estate, if there is any risk that a disgruntled family member might come forward.
There might need to be final tax returns for the deceased or for the estate. Failing to wait for the ATO to process these could leave the executor personally liable for a tax bill.

You might need to advertise for creditors to come forward and wait for a period of months while this advertising timeframe expires. This protects the executor if they are unsure of all of the deceased's financial dealings and creditors.
It might not always be a good time to immediately cash estate assets. For example, the shares just took a nose-dive, do you still sell regardless of available price?

There is a general rule that executors have an 'executor's year' to complete the estate administration. This means that you should be aiming to have the estate finalised and distributed within 12 months from the date of death.

Liability limited by a scheme approved under Professional Standards Legislation.

Need help with Probate?

Our expert legal team is ready to take your call!

Mitchell is the Managing Principal of Sharrock Pitman Legal. He is an Accredited Specialist in Commercial Law (accredited by the Law Institute of Victoria). He also deals with areas of Employment Law, Wills & Estate Planning and Probate and can answer all your questions related to probate.

For further information, contact Mitchell on his direct line:

DIRECT LINE:

(03) 8561 3318

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Land Development and Joint Ventures

What are the advantages of a Trust?

A question our customers frequently asked us is: should I consider using a trust to hold and manage my assets? We explore some of the advantages of a trust, which might assist to answer the question of whether a trust is a good idea for you.

The issue

The basics

Advantages of a trust