Can I avoid probate by putting my property in a trust?

It depends on the type of trust you use. While trusts can be powerful estate planning tools, they come with different tax implications depending on when they are established.

Discretionary (Inter Vivos) Trusts

Assets held in a discretionary trust established during your lifetime (an inter vivos trust) are owned by the trustee, not by you personally. Because of this, they do not form part of your personal estate when you die and are not subject to probate.

However, transferring existing investment properties into a living trust triggers capital gains tax (CGT) at market value and Queensland stamp duty at the time of transfer. For someone who has owned property for many years, this can be a very significant and immediate cost.

Testamentary Trusts

A testamentary trust is created inside your Will and only activates upon your death. Because the assets are still owned by you personally during your lifetime, the estate still requires probate once.

However, the transfer of assets into that trust upon death is exempt from CGT and stamp duty in Queensland. Beneficiaries then receive distributions from the trust with significant tax flexibility, including the ability to income-split with minor children at adult tax rates under section 102AG of the Income Tax Assessment Act 1936 (Cth).

For most people with existing investment properties, a testamentary trust inside a carefully drafted Will delivers the key asset protection benefits without the upfront tax cost of a lifetime transfer. Always consult with a solicitor and an accountant before making these decisions.

Related Topics

• When is a Grant of Probate required in Queensland?
• What happens if you die without a Will?

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