Protective Trusts: Bequeaths to the Vulnerable

When drafting your Will, you may want to include provision to a person who, for one reason or another, is unable to adequately manage their inheritance. Situations like this may arise where the intended beneficiary is severely disabled, mentally ill, suffers from an addiction of some sort or is simply too young to be able to manage their finances independently.

Rather than not provide for them at all, a protective trust gives Will-makers (‘Testators’) the ability to ensure that the beneficiary will receive their inheritance, but not have to manage the money or property directly.

What is a Protective Trust?

Funds or property placed into a protective trust are controlled by an independent person (a ‘Trustee’) whose job it is to ensure that the trust contents are properly maintained and periodically distributed. The ‘Trust Deed’ dictates the role of the Trustee. This is a document that outlines their duties and responsibilities and the way in which the trust’s contents are to be distributed.

A protective trust can be established so that any income that is excess to the beneficiary’s needs can stay in the trust, or even be distributed to other beneficiaries (for example, that beneficiaries dependents).

For example, rather than simply granting $300,000 to a beneficiary in a lump sum, a Trustee will ensure that this amount is placed into a high interest savings account or invest it into a property, to ensure that the money is not spent rapidly. The Trustee will then distribute the trust’s contents in a sustainable manner to the beneficiary.

Are the Set ‘Purposes’ of Protective Trusts Controlled?

Obviously, the main purpose of a protective trust is to provide inheritance to a vulnerable person for their benefit – thus, protective trusts that predicate distribution on conditions that could be considered counter to their benefit will not be enforceable under Australian law. This is not to say that certain conditions cannot be placed on the distribution of protective trust assets.

A protective trust does not need to provide for a beneficiary’s total living expenses. More often than not, these protective trusts have particular purposes, for example, one might be set up to provide for a beneficiary’s education or medical expenses.

When considering the terms and requirements of a protective trust, it is always important to speak with an Estate specialist. He or she will be able to properly guide your decisions and allow your protective trust to run in the best possible way, to ensure that vulnerable loved ones are cared for in the way in which you intended.

If you have concerns about someone’s Will it is very important that you seek legal advice as soon as possible after their death. So, to discuss your concerns, whether it be Defending or Disputing Inheritance, please don’t hesitate to contact the team at Hentys Lawyers today.