Protective Trust

A protective trust holds a beneficiary's inheritance under the management of a trustee rather than paying it out directly, to protect someone who may be unable to manage money or who faces risks like bankruptcy, addiction, or undue influence. The beneficiary still benefits — receiving payments for living expenses, housing, or care — but cannot dissipate the capital or have it seized by creditors. It is typically created as a testamentary trust within a Will.

Protective trusts are common where a beneficiary has a disability, a gambling problem, or is going through a divorce. Example: Lina's Will leaves her daughter's share in a protective trust so the funds support her but cannot be reached by her ex-partner in a property settlement. For beneficiaries on a disability pension, a Special Disability Trust may offer additional Centrelink concessions a general protective trust does not.