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Wills vs. Trusts: Which Asset Protection Strategy is Best for Perth Families?
When it comes to protecting your legacy in Western Australia, the standard Will is often the first thing people think of. But for many Perth families, especially those with significant property, business interests, or complex family dynamics, a simple Will might leave your beneficiaries vulnerable.
At TLS, we believe in cut-through clarity. Choosing between a standard Will and a Testamentary Trust isn’t just a legal formality; it’s a tactical decision about how much control and protection you want for your family after you’re gone.
What is the difference between a Will and a Trust in Australia?
To understand which is right for you, we first need to define the two most common tools used in WA estate planning.
1. The Standard Will
A standard Will is a legal document that outlines who gets what. Once probate is granted, the assets are distributed directly to your beneficiaries.
- The Upside: Simple to create and easy to understand.
- The Downside: Once the money hits your beneficiary’s bank account, it is “at-risk.” It can be claimed by creditors, lost in a divorce settlement, or spent all at once.
2. The Testamentary Trust (The “Gold Standard”)
A Testamentary Trust is a trust created by your Will. It only comes into existence after you pass away. Instead of the money going directly to a person, it goes into a protected “bucket” managed by a Trustee.
- The Upside: Superior asset protection and significant tax savings for your children and grandchildren.
- The Downside: Higher setup costs and ongoing accountancy requirements.
Comparison at a Glance: Will vs. Testamentary Trust
| Feature | Standard Will | Testamentary Trust |
| Asset Ownership | Beneficiary owns assets directly. | The Trust owns the assets. |
| Protection from Divorce | Assets are often part of the “marital pool.” | Assets are generally shielded from family law claims. |
| Protection from Creditors | Assets can be seized if bankrupt. | Assets are generally shielded from creditors. |
| Tax Flexibility | None. Earnings are taxed at the individual’s rate. | High. Income can be split among family members. |
| Complexity | Low. | Moderate (requires annual tax returns). |
Why Perth Families are Choosing Testamentary Trusts
While a living trust vs. Will is a common search term, most Australians find that a Testamentary Trust provides the best balance of lifetime control and post-death protection. Here is why it might be the “tactical” choice for you:
1. Tax Efficiency for the Next Generation
In a standard Will, if your child inherits $1M and invests it, they pay tax on the earnings at their marginal rate (often 47% for high earners).
In a Testamentary Trust, they can distribute that income to their own children (your grandchildren). Under Australian tax law, minors in a Testamentary Trust receive the full adult tax-free threshold (approx. $18,200/year). This can save a family tens of thousands in tax every single year.
2. Safeguarding Against Life’s Uncertainties
If your beneficiary is a business owner, a doctor, or in a high-risk profession, they are at risk of being sued. A Testamentary Trust ensures the inheritance isn’t sitting in their name, making it much harder for creditors to touch.
3. Protection from Relationship Breakdowns
We often see clients concerned about “gold-digging” partners or the risk of a child’s divorce. Because the assets are held in a trust and not owned by the individual, they are often excluded from (or given special status in) Family Court property settlements.
FAQs: Wills and Trusts in Western Australia
Is a living trust the same as a testamentary trust?
No. A living trust (Inter Vivos) is set up while you are alive. A testamentary trust is written into your Will and only “wakes up” when you pass away. For most families, a testamentary trust is more cost-effective as it doesn’t require management while you are still here.
How long does a trust last in WA?
Under Western Australian law, a trust can generally last for up to 80 years. This allows you to protect your wealth not just for your children, but for your grandchildren as well.
Do I need a trust if I don’t have millions?
Not necessarily. However, if you own a home in Perth and have a healthy Superannuation balance, your estate is likely worth over $1M. For estates of this size, the tax savings alone often pay for the cost of the trust within the first two years.
Tactical Advice: Which one do you need?
Choose a Standard Will if: Your estate is modest, your beneficiaries are financially responsible adults with low-risk profiles, and you want the simplest possible process.
Choose a Testamentary Trust if: you have over $500k in assets, you want to protect your children from divorce/bankruptcy, or you want to provide for grandchildren tax-effectively.
Secure Your Legacy with TLS
Estate law is personal, but the solutions should be tactical. At TLS, we move past the jargon to build structures that actually work for Perth families.
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