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Do I still need a trust?
Trusts aren't what they used to be. Tax advantages have largely disappeared. Asset protection has become harder. Yet trusts still serve legitimate purposes. The question is whether those purposes apply to you.
What's changed.
Several significant changes have shifted the calculus on whether trusts make sense.
39% trustee tax rate
Since 1 April 2024, trustees pay 39% on trustee income. This matches the top personal rate, eliminating the tax advantage trusts once offered.
Relationship property claims
Courts can look through trusts when dividing relationship property. Asset protection from relationship claims is no longer reliable.
Trusts Act 2019 duties
Trustees have enhanced disclosure duties and clearer obligations. Running a trust properly requires more active management than before.
Bright-line test extended
Trusts are subject to the same bright-line rules as individuals. No special property tax advantages.
Trust vs Will: which do you need?
Many people confuse what trusts and wills do. Here's how they differ.
Trust
Takes effect during your lifetime
- Control assets beyond your death
- Protect vulnerable beneficiaries
- Ongoing compliance required
Best for
Multi-generational planning, vulnerable beneficiaries, business succession
Will
Takes effect after your death
- Simple, one-time setup
- Low ongoing costs
- Can include testamentary trusts
Best for
Straightforward estates, adult beneficiaries, clear distributions
When a trust might still make sense.
Protecting vulnerable beneficiaries
If you want to provide for someone who can't manage money themselves, a trust with appropriate conditions can protect their inheritance.
Example: A child with a disability, a family member with addiction issues, or children who aren't yet mature enough.
Controlling intergenerational wealth
Trusts can ensure assets pass to the people you intend, even after your death. They provide control that a will alone cannot.
Example: Ensuring your family bach stays in the family rather than being sold.
Business succession
Holding business interests in a trust can facilitate gradual succession and protect the business from personal creditor claims.
Example: Transitioning a family business to the next generation while maintaining control.
Specific asset protection scenarios
While not as robust as before, trusts can still provide some protection in specific circumstances, particularly if established well before any claim arises.
Example: Professionals in high-risk occupations establishing trusts before entering practice.
When a trust probably doesn't make sense.
Should you keep your existing trust?
If you already have a trust, don't rush to wind it up. Use this framework to evaluate your situation.
Why was the trust set up?
Does the original purpose still apply?
Consider whether your circumstances have changed:
- - Children who were young are now adults who can manage money
- - Professional risks you were protecting against no longer apply
- - The business the trust holds has been sold
What does the trust actually own?
If significant assets:
The family home, investment properties, or business shares may justify the compliance costs.
If minimal assets:
Annual accounting and compliance costs may exceed any benefit. Winding up could simplify things.
Making the decision
If you answered "no longer applies" to questions 1 or 2, or "minimal assets" to question 3, a trust review is worthwhile. We can assess the implications of keeping, restructuring, or winding up your trust.
Key Takeaways
Tax advantages of trusts have largely disappeared
Asset protection from relationship property claims is less reliable
Trusts still work for protecting vulnerable beneficiaries
Many existing trusts may no longer serve their original purpose
Review your trust against current circumstances before deciding
Related Guide
Learn how trusts work and whether one is right for your situation.
Read the Trust Basics GuideRelated Reading
Understanding your trustee duties under the Trusts Act 2019
The Trusts Act 2019 imposes clear duties on all trustees. Understanding these obligations helps you fulfil your role and avoid personal liability.
Should I Agree to Be a Trustee?
Being asked to be a trustee is an honour, but it comes with real responsibilities. Here's what to understand before you accept.