Living Trust vs Will - Australia. A Guide for NSW Residents
Estate planning can feel overwhelming, especially when you encounter terms like “will” and “living trust”, which you may not be at all familiar with. So, what is a will, and what is a living trust in Australia? While many NSW residents aren’t sure what they are, others are not sure which option is right for them, or whether they need both a will and a living trust. Making the right choice for both options will help ensure a deceased’s wishes are carried out. It clarifies how to protect any assets held and how family members are cared for.
Planning ahead also provides peace of mind. Without proper planning, loved ones might have to navigate a time-consuming legal process, which can delay distributions and cause unnecessary stress. At NSW Probate, our legal services support means we break down the concepts in simple, clear terms so you can make informed decisions confidently.
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Understanding Living Trusts vs Wills
What Is a Will?
A will is a legal document that explains how you want to leave assets after your death. It acts as a roadmap for your executor, ensuring your remaining assets reach the intended beneficiaries. Without a will, the court decides how other assets are divided, which may not reflect your personal wishes. Put simply, a will is about clarity. It ensures that the people and causes you care about are looked after, rather than leaving those decisions up to the court.
A will can also:
- Appoint guardians for minor children.
- Specify how property and other assets should be distributed.
- Include directions for superannuation funds or gifts to a charitable organisation.
Even a simple estate benefits from a will, as it avoids disputes and ensures that significant assets are allocated correctly. Wills also provide clarity for executors who might otherwise be personally liable for mistakes or omissions.
What Is a Living Trust in Australia?
A living trust (also called an inter vivos trust) is created during one’s lifetime to hold trust assets for assigned beneficiaries. Unlike a will, a living trust allows you to manage assets, distribute trust income, and provide asset protection while you are alive. This can provide greater control and privacy, as assets held in a living trust typically avoid the public probate process after your death.
With a trust established, a trustee oversees the trust property according to the trust deed. This gives the trustee’s discretion to allocate income or principal to certain beneficiaries in line with your wishes.
Living trusts are particularly useful if you want to include charitable trusts, support charitable causes, or provide for minor children while keeping your assets out of the public record. You can also use a living trust for business purposes, protecting assets and simplifying succession planning.
Example of when you may use a living trust:
For example, if you want to provide long-term financial support for a child with a disability, or ensure a family business smoothly passes to the next generation, a living trust can offer the flexibility that a standard will can’t.
Structuring your living trust
You can structure your trust in different ways, including discretionary trusts, fixed trusts, unit trusts, hybrid trusts, or special disability trusts, depending on your specific circumstances and trust structures.
The most common in New South Wales is the discretionary trust, which is often referred to as a family trust when it’s established for the benefit of family members. It allows the person in charge (called a trustee) to decide how to share the trust assets and income among the beneficiaries. This provides flexibility to respond to the changing needs of assigned beneficiaries over time, which can be particularly useful for long-term financial support.
Key Differences Between Will vs Living Trusts
To make the key differences easier to see at a glance, here’s how wills and living trusts compare in practice:
Some additional key differences:
- Timeline and control: A will only activates after death, while a living trust allows you to distribute assets like trust income and adjust trust assets during your settlor's lifetime.
- Probate and privacy: Living trusts can avoid probate, keeping your estate private and accessible to your beneficiaries.
- Management and complexity: For complex financial arrangements, a trustee can implement tax concessions and work with a financial affairs advisor or provide tax advice to maximise value.
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Choosing Between a Will and a Living Trust?
Scenarios Where a Will Makes Sense
A will is generally sufficient if your estate is straightforward. Consider a will if:
- You own a single property or have super funds.
- You need to appoint guardians for minor children.
- You prefer the simpler probate process.
- Most of your estate consists of liquid assets or easily managed assets held in your name.
Even in these cases, a will prevents disputes and provides clarity for your executor and beneficiaries.
Scenarios Where a Living Trust Makes Sense
A living trust is ideal if you want to avoid probate or have more complex needs. Consider a living trust if:
- You have multiple properties, significant assets, or a family business for business purposes.
- You want to provide for beneficiaries of a certain age or with a severe disability.
- You value privacy, keeping trust income and asset allocations out of the public record.
- You wish to include charitable trusts or support charitable causes while retaining flexibility in asset distribution.
When You Might Need Both
Using a will alongside a testamentary trust or a living trust ensures:
- Any other assets not in the trust are still distributed according to your wishes.
- Protection for minor children or beneficiaries with special needs.
- Support for charitable causes while maintaining flexibility in trust income management.
Many NSW residents actually benefit from using both a will and a trust. A will can handle any assets not transferred into the trust, while the trust manages ongoing needs for beneficiaries.
What Happens If You Don’t Have a Will or Trust?
Without planning, your estate may pass according to intestate succession rules in NSW:
- Close family members, like a spouse or children, receive the remaining assets first.
- If no close relatives exist, the estate may go to extended family or even the government.
This can be time-consuming and requires a legal process to appoint administrators. Proper planning ensures your deceased’s wishes are respected, your assets are protected, and your beneficiaries receive what you intended.
How NSW Probate Can Help You Through The Legal Process
At NSW Probate, we guide you through all aspects of estate planning:
- Drafting a will or living trust tailored to your situation.
- Advising on trust structures, including fixed trusts, hybrid trusts, corporate trustee options, or unit trusts.
- Navigating the probate process and ensuring your trust assets are secure.
- Offering access to a financial advisor or tax advice to maximise your estate’s value.
Main benefits of working with NSW Probate:
- Protect your assets and trust assets.
- Ensure your deceased’s wishes are followed accurately.
- Simplify a potentially time-consuming process for you and your loved ones.
With expert guidance, we can further guide you through the benefits of a living trust vs a will. You can choose the right combination of a will, will trusts, living trusts, or other trust structures to provide peace of mind for both you and your beneficiaries. For estate administration, deceased estates, estate planning, and estate litigation, we’re here to support you.
