When administering a deceased estate, various types of trusts may need to be established to manage and protect assets for beneficiaries. The Legal Personal Representative (LPR) is typically responsible for setting up these trusts correctly and may also need to oversee their administration over time. This article explores the different types of trusts that may be encountered in estate administration, their purposes, and the responsibilities of the LPR in managing them.
Life Interests
A Will may give a beneficiary the right to use and benefit from an asset (such as property) for the duration of their life. This arrangement is known as a life interest. The beneficiary, referred to as the life tenant, has the right to occupy or receive income from the asset during their lifetime. Depending on the specific terms in the Will, they may not have the right to sell or otherwise dispose of the asset.
The LPR is required to manage and protect the assets for the benefit of the remaindermen (the beneficiaries who will inherit the asset after the life tenant’s death) in accordance with the terms of the Will. This can include ensuring that the property is maintained, taxes and insurance are paid, and any income generated from the asset is properly accounted for and distributed to the life tenant, or it may mean ensuring that the life tenant attends to some of these matters. The LPR must balance the interests of the life tenant with those of the remaindermen, ensuring that the asset is preserved for future inheritance.
Testamentary Trusts
Testamentary trusts are established by a Will and come into effect after the testator’s death. These trusts offer several benefits, including asset protection, tax advantages, and controlled distribution of assets to beneficiaries. Testamentary trusts can be particularly useful for providing for minor children, protecting assets from creditors, and ensuring that beneficiaries with special needs are adequately cared for.
An LPR will need to establish the testamentary trust according to the terms set out in the Will. This involves transferring the specified assets into the trust and ensuring that the trust is properly registered and administered. If no trustee is appointed in the Will, the LPR may be required to act as trustee or appoint a suitable trustee to manage the trust.
Special Disability Trusts
Special Disability Trusts are set up to provide for the long-term care and accommodation needs of a disabled beneficiary while exempting assets from the asset means test. These trusts are designed to ensure that the disabled person receives the necessary support without affecting their eligibility for government benefits.
LPRs should obtain advice when handling these trusts, as there are specific criteria that must be satisfied, including:
- The trust must be established for the primary purpose of providing for the care and accommodation needs of the disabled beneficiary.
- The beneficiary must meet the definition of “severely disabled” as outlined in the relevant legislation.
- The trust must comply with reporting and auditing requirements to ensure there is adequate transparency and accountability.
- The trust can only receive funds from certain sources.
Minor Beneficiaries
Where there are beneficiaries who are not yet old enough to inherit (for example, not yet 18), their funds will typically be held on trust for them by the LPR of the estate. This ensures that the assets are preserved and managed until the beneficiaries reach the age of majority or another age specified in the Will.
Depending on the terms of the Will, the LPR may have the discretion to release funds for the benefit of the beneficiaries before they have reached the specified age. This can include payments for education, healthcare, and other essential needs. The LPR must exercise this discretion responsibly and ensure that the funds are used in the best interests of the beneficiaries.
The LPR is responsible for managing the trust assets, which may include investments, property, and other financial instruments. This involves making prudent investment decisions, keeping accurate records, and providing regular reports to the beneficiaries or their guardians.
Obtaining Advice
Given the complexity of trust administration, LPRs should seek legal, tax and financial advice to ensure that they are fulfilling their duties correctly. This can help prevent disputes and ensure that the trusts are managed in accordance with the law and the wishes of the deceased.
How can Novum Law Group assist you?
Navigating the complexities of trusts within estate administration can be challenging. Novum Law Group is here to provide expert guidance and support throughout the entire process. Our experienced team can assist with establishing, administering and winding up trusts.
If you have a query or would like advice regarding an estate trust, our Wills & Estates Team would be glad to assist you. Please call us on 9063 0300 or send us an email to discuss with one of our lawyers, or click here to make an appointment.
Author
Sheredyn Legg
Stephen Fries
The information provided in this article is for general informational purposes only and is not intended to serve as legal advice. For specific legal concerns, please speak directly with one of our qualified lawyers.
Liability limited by a scheme approved under Professional Standards Legislation.
