Updated 4 November 2026
CM Law's Ultimate 50 List: Making a Will #33 - What is a trust, and how does it differ from a will?
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A trust and a will perform different jobs, and an estate plan may use both. The useful starting point is your purpose: who should benefit, who should manage the assets and when the arrangement should operate. Choosing a trust without understanding its ongoing responsibilities can create problems for the people you hoped to help.
What is a trust?
A trust is a legal relationship in which a trustee holds or manages property for beneficiaries under enforceable obligations. It is not a separate legal person like a company, although tax law treats trusts as entities for particular purposes. The trustee may be an individual or a company.
The Law Society’s overview explains the distinction. Legal title and beneficial rights can differ: the name registered as owner does not necessarily identify everyone entitled to benefit. The trust terms and applicable law determine the beneficiaries’ rights.
How does a trust differ from a will?
A will records instructions for your estate after death, including who should administer it and receive its assets. A trust provides a framework for holding and managing property for beneficiaries. A will can itself create a trust, so the choice is not necessarily between one document and the other.
Having a lifetime trust does not remove the need to plan for assets you own personally. A properly prepared will can also address executor appointments and gifts that have nothing to do with the trust.
What is the difference between lifetime and testamentary trusts?
A lifetime trust operates during the person’s life, commonly under a trust deed. A testamentary trust is established through a valid will and operates after death. Its terms may provide continuing management for beneficiaries rather than immediate outright gifts. Each arrangement needs suitable property, clear terms and appropriate administration.
A trust is not funded merely because someone mentions an asset in a document. Check how property will be transferred or held, and any tax, duty, lender or registration requirements. Testamentary arrangements must also fit the estate’s debts and administration.
Are the executor and trustee doing the same job?
An executor administers the deceased estate, including collecting assets, paying liabilities and carrying out the will. A trustee may then manage assets under an ongoing testamentary trust. The same person can hold both roles, but the responsibilities differ. A continuing trust is distinct from the deceased estate’s administration.
The NSW executor guide explains estate administration. When planning a long-term trust, consider whether the proposed trustee is willing and capable of ongoing decisions, accounting and communication. Someone suitable for a short administration may not want a lengthy trusteeship.
Which assets can my will place into a testamentary trust?
Your will can direct estate property into a trust, but it cannot simply dispose of assets owned by someone else. Joint tenancy property, superannuation death benefits and existing trust or company assets need separate examination. Your personal shares, loans or other interests may require different treatment from the underlying assets.
NSW guidance on what a will can cover highlights these boundaries. Superannuation may enter the estate if paid to your legal personal representative, but that outcome depends on the fund rules and applicable arrangements. Coordinate nominations and ownership before drafting.
Who controls a trust, and what happens if they die?
The trustee makes decisions within the trust’s terms and legal duties. Some trusts also have an appointor with power to appoint or remove trustees. Control can change through death, incapacity or resignation. A corporate trustee adds company succession issues, including who becomes director and who owns its shares.
The Law Society explains these roles. My practical advice is to map each controlling position and its replacement separately. Do not assume the beneficiary, executor, attorney and appointor automatically have the same powers or that a will overrides the deed.
What duties does a trustee owe?
A trustee must administer the trust according to its terms and law, exercise appropriate care and act for the beneficiaries rather than unauthorised personal advantage. Responsibilities can include investment decisions, accounts, distributions and tax compliance. Agreeing to act for family does not make these responsibilities optional or merely informal.
NSW Government guidance for trustees explains that breaches can create personal liability. Keep trust property and records identifiable, document decisions and obtain advice about conflicts. A corporate trustee does not make the trust’s administration free of obligations.
Does every beneficiary own a fixed share?
No. Under a fixed trust, beneficiaries have defined entitlements under its terms. Under a discretionary trust, membership of the beneficiary class does not itself guarantee a particular payment or share of the assets. The trustee’s decisions remain subject to the trust terms and duties; discretion is not unlimited freedom.
Check eligibility, distribution powers and what happens if no decision is made. Beneficiaries should seek advice about their particular rights to information or enforcement. The trust document’s structure matters more than an informal family description of who will eventually receive everything.
Can a trust help a child or vulnerable beneficiary?
A properly designed trust can provide managed support where an outright gift would be unsuitable, including for a child or a person needing assistance with financial decisions. The terms should address practical needs and trustee discretion. Eligibility for government benefits and any special concessions must be assessed separately.
Consider housing, education, care and emergency expenses, together with who understands the beneficiary’s circumstances. Special disability trusts have strict requirements; an ordinary family trust does not automatically qualify. Avoid conditions that leave the trustee unable to provide the support intended.
Will using a trust reduce tax?
Not necessarily. Tax depends on the trust, assets, beneficiaries, distributions and applicable rules. Australia has no general inheritance tax, but income tax, capital gains tax and state taxes can still matter. Creating or transferring assets into a trust can have tax consequences before any expected benefit is realised.
ATO guidance on minors’ income limits special treatment of testamentary trust income to qualifying deceased-estate sources; unrelated assets do not automatically qualify. NSW land tax treatment also varies by trust type. Obtain modelling of setup, annual and exit costs under the rules applying when transactions occur.
Does a trust avoid probate and keep everything private?
Not automatically. Assets already validly held on a lifetime trust are generally distinct from personally owned estate assets, but trustee succession still needs attention. A testamentary trust operates through a will, and probate may be needed for the estate. Trust arrangements can also require disclosure to authorities, beneficiaries or courts.
The Supreme Court explains when probate is needed; it is not compulsory for every estate. Do not transfer assets solely on a promise of avoiding probate. Check the legal ownership, costs and practical authority needed to deal with each asset.
Does a trust protect assets from every claim?
No. A trust is not a universal shield against creditors, family law claims or estate disputes. The particular interests, control, transactions and applicable legislation matter. In NSW, statutory notional estate provisions can sometimes reach property outside the estate. No structure should be sold as making a family’s assets untouchable.
AFSA distinguishes property held for others from a bankrupt’s own property. That distinction does not protect every beneficiary’s interest or distribution. NSW judicial guidance explains notional estate. Obtain advice about the specific risk before transferring assets or choosing who will control them.
What does a real case show about trustee responsibilities?
Byrnes v Kendle [2011] HCA 26 illustrates that holding legal title does not erase obligations to a trust beneficiary. Mr Kendle owned a South Australian property in his name but had declared that he held a half interest for his wife. The High Court enforced the trust and trustee duties.
After the couple moved out, Mr Kendle let the house to his son, collected only the initial rent and did not pursue further payments for years. His wife later assigned her interest and rights to her own son. The High Court allowed their appeal, finding that the trustee had duties concerning collection of rent and replacement of a non-paying tenant, and liability for the beneficiary’s lost rental entitlement. This concerned a particular lifetime trust, not a NSW testamentary trust or tax-saving scheme. It shows why the document and ongoing conduct both matter.
Can a trust be changed later, and what will it cost?
Changes depend on the trust terms, existing rights and applicable law. A trustee cannot simply rewrite the arrangement because the family agrees informally. Amendments, replacement trustees or termination may require particular powers, consents or court involvement. Consider the legal and tax consequences before signing changes or moving assets.
Budget for preparation, transfers, administration, accounts, tax returns and future advice. Ask for a scope and estimate suited to the proposed arrangement. Review the documents after significant family or financial changes; an old trust deed may not reflect today’s intentions.
How can CM Lawyers help me choose an appropriate estate plan?
CM Lawyers can review your assets, family circumstances and objectives, then explain whether outright gifts, a testamentary trust or coordination with an existing trust suits your needs. We can address drafting and succession arrangements while working with your accountant on tax consequences and the practical costs of the structure.
Arrange a will and estate planning appointment on 02 9557 9000 or at lawyers@cmlaw.com.au. Our office is Level 3, Unit 3.07, 18–30 Faversham Street, Marrickville NSW 2204.
General information only, current at 4 November 2026. Obtain legal and tax advice for your circumstances before creating, funding or changing a trust.
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