Summary:
- There are different types of trusts in Australia. Of these,8 common types include: Fixed, Unit, Family (Discretionary), Testamentary, Hybrid, Charitable, Superannuation, and Bare Trusts.
- Each trust has different rules around how assets and income are distributed, who benefits, and how they’re taxed.
- In WA, choosing the right trust means understanding local laws and getting proper legal advice from family trust lawyers who know the landscape.
Trusts are a common way of organising and dealing with finances within and between families, businesses, corporations and even governments. When it comes to investments, planning, and transferring wealth, a trust serves a critical role in ensuring that the parties recognised by the trust are able to receive, send and generate wealth based on the specific terms of the trust deed.
In this blog, we take a closer look at 8 different types of trusts in Australia, what purpose they serve and why you should choose one over the other.
What is a trust?
A trust is a legal relationship created when one person or entity (the trustee) agrees to hold and manage assets for the benefit of another (the beneficiary). This relationship is usually formalised in a trust deed, which outlines the roles, responsibilities, and rules that govern how the trust operates.
Trusts aren’t new. The concept originated in English law, where courts began to recognise not only the legal ownership of property, but also the rights of others to benefit from that property — even if their name wasn’t on the title. That legal tradition still forms the foundation of trust law in Australia today.
A trustee can be a company, an individual, or a group. The assets might include cash, property, shares, or business interests. The beneficiaries can be family members, organisations, or even charities.
WA’s legal framework for trusts
In Western Australia, trusts are primarily governed by:
- The Trustees Act 1962 (WA) — which outlines the powers and duties of trustees
- Common law (court decisions based on precedent)
- The terms of the individual trust deed
While trusts are recognised Australia-wide, the rules around how they operate — especially in estate disputes — can vary from state to state. That’s why it’s important to get advice from someone who understands WA-specific trust and succession law.
Why might you need a trust?
Trusts aren’t just for the wealthy or the complicated. They’re one of the most effective legal tools available if you want to protect your assets, look after loved ones, and reduce the risk of disputes later on.
In Western Australia, we see trusts used in all kinds of situations and not just in high-value estates. A trust might be right for you if you:
- Want to make sure your children or grandchildren inherit responsibly
- Need to protect a vulnerable beneficiary, such as someone with a disability
- Run a family business or own investment property
- Have a blended family or foresee potential disputes after you’re gone
- Want to manage tax liabilities more efficiently across generations
A well-structured trust can be the difference between a smooth transfer of wealth and a long, expensive legal dispute. It allows you to apply foresight, not just goodwill. And it ensures that what you’ve worked for continues to serve the people you care about — on your terms.
How does a Trust work?
At its core, a trust is a legal relationship where someone holds assets for the benefit of someone else. Here’s how it works in practice:
1 A trust is created
This can happen during someone’s lifetime (e.g. a family trust) or through a Will after they die (a testamentary trust).
2. A trust deed sets the rules
This legal document outlines the terms of the trust — who’s involved, what assets are included, and how it should be managed.
3. A trustee is appointed
The trustee is the person (or company) responsible for managing the trust and making decisions about how to distribute the assets.
4. Beneficiaries are named
These are the people (or organisations) who benefit from the trust — they might receive income, capital, or specific assets.
5. The trustee manages and distributes assets
Depending on the type of trust, the trustee may have full discretion (in a discretionary trust) or be required to follow fixed rules (in a fixed trust).
6. The trust ends (or continues)
Some trusts are set up for a fixed period or until a specific event (like a child turning 25). Others can continue across generations.
Types of trusts in Australia
There are many different types of trusts out there, and it can be confusing to know which one is right for you. At the end of the day, trusts are unique depending on who is involved and why. With that in mind, here are eight of the most common trusts operating in Australia.
Fixed trusts
A fixed trust is a type of trust where the beneficiaries have a pre-determined, fixed entitlement to the income or capital of the trust. The trustee has no discretion to vary how these benefits are distributed — everything is set in stone according to the trust deed.
Who is a fixed trust best suited for?
- Business partners or unrelated parties investing together
- Joint ventures where clear, predictable returns are needed
- Beneficiaries who need certainty over income distribution
- Situations where disputes or family dynamics require fixed outcomes
Key features of a fixed trust
- Beneficiaries have a fixed share of the trust’s income and capital (e.g. 50/50)
- The trustee must distribute income and assets according to the fixed proportions
- Beneficiaries can enforce their entitlements through legal action
- Often used in investment structures, such as property syndicates
- Requires a well-drafted trust deed to avoid ambiguity
- Less flexibility compared to discretionary trusts
- Tax obligations are generally passed directly to each beneficiary
Things to keep in mind
Fixed trusts must follow the set entitlements in the trust deed. The trustee has no flexibility, and any change to who gets what usually requires a legal amendment. This makes fixed trusts less suitable for families with changing needs. Trustees have limited discretion and must strictly follow the rules — any breach can have legal consequences. Tax treatment can also be complex, particularly if the trust holds different types of assets.
Unit trusts
A unit trust is a type of fixed trust where the trust’s assets and income are divided into units, similar to shares in a company. Beneficiaries (called unitholders) hold a specified number of units, which determines their entitlement to income and capital distributions from the trust.
Who is a unit trust best suited for?
- Business partners entering a commercial venture
- Property investors pooling funds into a single trust
- Joint ventures needing a clear, proportional ownership structure
- Individuals or entities wanting transferable investment interests
Key features of a unit trust
- The trust is divided into units, each representing a share of the trust’s assets and income
- Unitholders have fixed entitlements based on how many units they hold
- Trustees must distribute income and capital in line with unit holdings
- Units can be bought, sold, or transferred, depending on the trust deed
- Commonly used in property investment and business structures
- Can be registered for GST and ABN if operating as a commercial entity
- Each unitholder is usually responsible for their share of tax on income
Things to keep in mind
Unit trusts require careful setup to avoid disputes over ownership or income rights. All distributions must follow the unit structure set out in the deed. Transferring units may trigger tax or stamp duty implications. Trustees have limited discretion and must act strictly according to unit entitlements. If not managed well, the structure can become rigid or lead to disputes between unitholders.
Discretionary trusts (family trusts)
A family trust — formally known as a discretionary trust — is a trust where the trustee has full discretion over how income and capital are distributed among the beneficiaries. The beneficiaries don’t have fixed entitlements. Instead, the trustee decides who receives what, how much, and when, based on the terms of the trust deed.
Who is a family trust best suited for?
- Families wanting to protect assets across generations
- Business owners looking for flexible income distribution
- Individuals seeking to manage tax across family members
Key features of a family trust
- The trustee has complete discretion over distributions
- Beneficiaries do not have a legal right to receive income unless the trustee chooses to distribute it
- Often used by families to manage income, assets, and estate planning
- Can include a wide range of potential beneficiaries (e.g. children, spouses, companies)
- May be established during life or through a Will (as a testamentary discretionary trust)
- Typically includes an appointor role — the person who can replace the trustee
- Income can be allocated strategically to minimise tax liabilities
Things to keep in mind
Family trusts require careful setup and active management. The trustee’s role is powerful but comes with legal responsibilities. If disputes arise between beneficiaries or family members, discretion can become a point of tension. Tax benefits depend on compliance with the trust deed and current ATO rules. It’s essential to review the trust regularly, especially as family circumstances change.
Testamentary trusts
A testamentary trust is a trust created in your Will and only ‘activates’ after your death. It allows you to control how your estate is managed and distributed over time, rather than passing everything directly to beneficiaries. Testamentary trusts are highly flexible and can be tailored to protect assets, support vulnerable beneficiaries, and reduce tax across generations.
Who is a testamentary trust best suited for?
- Parents of young children or dependants with special needs
- Families wanting to protect inheritances from divorce, creditors, or disputes
- Will-makers seeking long-term control over how their estate is used
- High-value estates needing tax-effective distribution planning
Key features of a testamentary trust
- Only comes into effect upon the Will-maker’s death
- The Will sets out how the trust operates, who benefits, and who controls it
- The trustee manages the trust assets on behalf of one or more beneficiaries
- Can be structured as discretionary, fixed, or hybrid, depending on the Will
- May include age restrictions, conditions for access, or limits on use of funds
- Offers tax advantages — minor beneficiaries may be taxed as adults for trust income
- Commonly used in Western Australia to reduce the risk of future inheritance disputes
Things to keep in mind
Testamentary trusts require detailed planning and clear drafting in your Will. If not set up properly, they may be challenged under the Family Provision Act 1972 (WA) by excluded or disappointed family members. Trustees have significant responsibilities and must act in line with your wishes and the law.
Hybrid trusts
A hybrid trust is a type of trust that combines features of both fixed trusts and discretionary trusts. In a hybrid trust, some beneficiaries have fixed entitlements (like unit holders), while others may receive income or capital at the trustee’s discretion. This structure offers a balance between predictability and flexibility.
Who is a hybrid trust best suited for?
- Investors who want defined ownership but flexible distributions
- Families or business partners with mixed financial arrangements
- Complex estate or business planning where both control and flexibility are needed
- High-net-worth individuals seeking customised wealth management
Key features of a hybrid trust
- Includes both fixed and discretionary elements
- May issue units to certain beneficiaries (like in a unit trust)
- Trustee retains discretion over parts of the trust income or capital
- Requires a clear and well-drafted trust deed to avoid confusion
- Can accommodate a mix of unrelated investors and family members
- Often used in family businesses with external investors
- Income splitting and tax planning must follow precise legal structure
Things to keep in mind
Hybrid trusts are more complex than standard trust structures. Poor drafting or unclear entitlements can lead to tax issues or legal disputes. Trustees must understand their dual obligations and follow the trust deed carefully. The structure may not suit simple family arrangements and often requires specialist legal and financial advice to establish and maintain.
Charitable trusts
A charitable trust is a trust set up to support a charitable purpose or cause. These trusts are structured to ensure that assets and income are used solely for approved charitable activities, and they often qualify for tax exemptions under Australian law if properly registered.
Who is a charitable trust best suited for?
- Individuals or families wanting to support philanthropic causes
- Organisations managing long-term donations or endowments
- Estates wishing to leave a lasting legacy to a charity or community group
- Business owners seeking a structured way to give back
Key features of a charitable trust
- Must have a clearly defined charitable purpose (e.g. health, education, relief of poverty)
- The trustee manages the assets for the benefit of one or more charitable organisations
- Cannot operate for personal profit or the benefit of private individuals
- Must meet legal requirements set out under WA and federal law to qualify for tax concessions
- Often registered with the Australian Charities and Not-for-profits Commission (ACNC)
- Requires transparent reporting and accountability in use of funds
Things to keep in mind
Charitable trusts are highly regulated. To be eligible for tax concessions, the trust must comply with charity law and meet specific requirements. The trustee has strict obligations to ensure funds are used exclusively for charitable purposes. Legal advice is essential to ensure the trust is properly set up, especially when included in an estate plan or Will.
Superannuation trusts
Charitable trusts are highly regulated. To be eligible for tax concessions, the trust must comply with charity law and meet specific requirements. The trustee has strict obligations to ensure funds are used exclusively for charitable purposes. Legal advice is essential to ensure the trust is properly set up, especially when included in an estate plan or Will.
Who is a superannuation trust best suited for?
- Anyone with superannuation — by default, you’re already a beneficiary of a super trust
- Individuals managing their own retirement savings through a Self Managed Superannuation Fund (“SMSF”)
- Families or estate planners considering how death benefits will be managed
- Business owners or professionals building wealth within a super structure
Key features of a superannuation trust
- Governed by a trust deed, along with superannuation legislation (SIS Act)
- Trustees (individuals or corporate) manage the fund in the best interests of members
- Super death benefits may be paid to dependants or the estate, depending on the nomination
- Superannuation nominations are not automatically included in your Will — must be planned for separately
- Can offer significant tax advantages for retirement savings and death benefit payments
- SMSFs give members full control but require strict compliance and reporting
Things to keep in mind
Superannuation is not automatically part of your estate. Without a valid binding death benefit nomination, your super may be paid at the discretion of the trustee — not necessarily according to your Will. SMSFs require ongoing compliance, documentation, and independent auditing. It’s essential to understand how your super trust fits into your overall estate and succession plan, especially in blended families or high-value estates.
Bare trusts
A bare trust is the simplest form of trust, where a trustee holds assets on behalf of a single beneficiary who has an absolute right to both the income and capital. The trustee has no discretion — they must act solely on the beneficiary’s instructions. Bare trusts are commonly used for holding assets on behalf of minors, or for nominee purposes in property and investment transactions.
Who is a bare trust best suited for?
- Parents holding assets on behalf of children (e.g. shares or property)
- Individuals wanting to keep ownership private (nominee arrangements)
- Investors or entities needing a straightforward holding structure
- People seeking a short-term or transitional legal arrangement
Key features of a bare trust
- One trustee and one legally competent beneficiary (or a minor with a guardian)
- The beneficiary has full control and can demand transfer of the assets at any time
- The trustee has no discretion — they must act on the beneficiary’s instructions
- Often used in property purchases, tax planning, or simple holding arrangements
- May not require formal registration but must still be documented properly
- Generally not suitable for complex estate planning or family succession
Things to keep in mind
Bare trusts offer no asset protection — the beneficiary is considered the owner for tax and legal purposes. If the beneficiary is a minor, control transfers automatically when they reach legal age. These trusts are not designed for long-term estate planning or situations involving multiple beneficiaries. Proper documentation is essential to avoid unintended tax or legal consequences.
FAQs about trusts in Australia
Do I need a trust for my estate?
Not everyone needs a trust, but many families in Western Australia benefit from using one. Trusts can protect vulnerable beneficiaries, reduce tax, manage intergenerational wealth, and minimise the risk of disputes. If your estate involves business assets, investment property, or blended family dynamics, a trust could be a smart choice.
What’s the difference between a trust and a Will?
A Will sets out your wishes after death and needs to go through probate. A trust is a legal arrangement that can take effect during your life or after your death (in the case of a Testamentary Trust). Trusts offer greater control, asset protection, and privacy — and can work alongside your Will as part of a complete estate plan.
Are trusts only for wealthy people?
No. Trusts are used by everyday families and business owners in WA — not just the wealthy. They can be valuable tools for managing family finances, protecting vulnerable loved ones, and reducing tax. Even a modest estate can benefit from the structure and flexibility a trust provides.
Who controls a trust?
The trustee controls the trust. They are legally responsible for managing the trust’s assets and following the instructions in the trust deed. Depending on the trust type, the trustee may have fixed duties or wide discretion in how they distribute income or capital to beneficiaries.
Can a trust be challenged in WA?
Yes. While trusts can offer protection, they’re not immune to legal challenges. In Western Australia, trusts linked to a Will (like Testamentary Trusts) can be contested under the Family Provision Act 1972 (WA) if someone believes they weren’t properly provided for. Other trusts may face scrutiny for mismanagement or breach of duty by the trustee.
Why you need the right legal advice around trusts
Trusts can be incredibly useful, but they’re not DIY territory. The wrong setup can cause major issues down the line, from unexpected tax consequences to disputes between family members.
In Western Australia, trust law isn’t just one area of law. It cuts across estate planning, family dynamics, tax rules, business structures, and superannuation. Getting it right means understanding how all those parts fit together and how to plan for what could go wrong.
That’s where we come in. At Solomon Hollett Lawyers, we help clients create and manage trust structures that work — legally, financially, and practically. If you want a trust that holds up now and into the future, talk to us.
Choosing the right trust for you
The structure you choose should reflect your goals, protect the people who matter, and stand up to whatever the future brings.
As trusted family trust lawyers in Perth, we know how to build trust structures that do what they’re meant to, and avoid the headaches they’re not.
If you need guidance on the right trust for your situation, get in touch with Solomon Hollett Lawyers. Call (08) 6244 0985 or book a free 15-minute consultation today.
