Family Trusts aren’t right for everyone. If you live a quiet little life, working for someone else and owning very little then the thousand odd dollars a year it costs to run a Family Trust probably isn’t worth it. If, on the other hand, you’re more of a go-getter and own your home along with a successful business then having a Trust is not at all dissimilar to having an insurance policy to protect your assets if things go bad.
Trusts are well known for saving wealth during business failure, a relationship breakdown and aged care but what they’re less known for is stopping frittering. Ah frittering! It’s not something that gets a lot of press but when there’s serious amounts of cash involved it’s a dangerous hobby. The word itself has such a fairytale ring to it but it’s certainly no fairytale when someone you love fritters away a life time of hard work in seconds! Believe me, it happens.
You may not care about what happens when you’re not around but would you feel differently if:
- You knew that your spouse and new partner would spend all your money leaving nothing for your childs essential medical care or education?
- Perhaps you’d be happy your spouse has a new partner but what if it means that your child misses out on most of your money because it’s also given to the partners children?
- It’s not just about protecting children either. We’ve seen lovely elderly people saving their entire lives only to wind up paying thousands of dollars in rest home care while the patient next to them pays absolutely nothing.
Sadly, these aren’t made up situations but thankfully a well run Trust can stop them happening. Trusts make people accountable for their spending because every time they take money out of the Trust the Trustees must agree in writing. Having a responsible independent person involved in the financial decisions is often what the people you care about really need especially if they’re grieving or know nothing at all about managing money.
Just ticking the box and getting a Trust isn’t enough to save you though. It’s essential to run your Trust properly and be aware that signing things like personal guarantees and solvency certificates can undo all the protection the Trust has given you.
If you’re serious about getting a Trust, don’t leave it too long because it can take years to get those hard earned assets safely tucked up in a Trust. Even after ten years of gifting, only $165,000 would be safe under the current means assessment for the Residental Care Subsidy (which allows gifts of $6,000 per year for gifts made within five years of applying and $27,000 for gifts made more than five years prior).