Trusts, the aged pension, and your Will

Trusts are popular and have many purposes, including asset protection, estate planning, and tax minimisation. One common strategy had been the use of trusts to maximize social security entitlements, such as the aged pension.

“This used to be widespread. Transferring wealth to a family trust meant that an individual or couple could reduce their personally-owned assets so as to increase their aged pension entitlement”, says Trent McGregor, inheritance law lawyer at Robertson Hyetts Solicitors.

However, changes to the law in 2002 mean that this strategy is no longer available, and trust assets are now scrutinised when calculating an aged pension entitlement.

“Anyone involved in the trust as a trustee or beneficiary can have all of the capital and income of that trust attributed towards them for the purposes of assessing their eligibility for the pension, even if they aren’t receiving a benefit. It’s a massive over-correction.”

Some people might still have complex, expensive, and redundant structures in place without realizing the consequences, particularly in relation to their Wills.

“Assets in a trust are not automatically dealt with as part of a person’s Will. The trust ‘survives’, so the assets stay in the trust and aren’t divided as part of the estate,” says Trent.

Unless careful thought is given to who can control the trust, one person could seize control of assets.

“A classic example is where the oldest child is nominated as the sole executor of a Will and is also one of a number of beneficiaries, and takes their share of the personally owned assets via the Will, but also snatches up all of the assets in the trust. If the Will is a basic Will, there isn’t much that the younger beneficiaries can do.”

For more information, or to make an appointment with one of our solicitors, please contact Robertson Hyetts Solicitors on 5434 6666.