A Protective Trust is simply another form of trust that has been created for the purpose of meeting the special needs of a particular beneficiary. These vehicles, typically created within a will, are created pursuant to various Trust statutes that exist in each of the States and Territories.

The beneficiary generally receives a proprietary interest in specified trust property, and often the trust is expressed to terminate on a particular event occurring, e.g. the bankruptcy of the beneficiary.

Such a trust may be appropriate for beneficiaries such as:

  1. disabled persons;
  2. those with a drug or gambling addiction;
  3. spendthrifts; or
  4. bankrupts.

The beneficiary/ies of such a trust have a fixed interest in the trust property similar to a ‘bare trust’ arrangement, although one in which the beneficiary has no right to call for the assets of the trust.


Any income derived by these trusts will not enter into any thresholds for the purposes of Centrelink income and assets tests.

For bankruptcy law purposes, as the beneficiary merely has a right to be considered by a trustee, any assets in the trust will not form part of the bankrupt’s estate.


It must be noted that protective trusts do not provide adequate protection from a family provision application. That is, eligible applicants may still be successful in arguing that they have not been adequately provided for under the deceased’s will.