Testamentary Trust Wills

While having a traditional Will may meet your needs, will it meet the needs of your beneficiaries? The beneficiaries of a traditional Will have no choice other than to take their gift in their own name or refuse it. Taking a gift in their own name may cause considerable and unexpected taxation consequences as well as numerous other issues, such as exposing the beneficiaries entitlement to a family law dispute or bankruptcy trustee.

The solution to this problem is achieved by establishing a Testamentary Trust.

A Testamentary Trust is simply a trust established in a Will and does not come into existence until the Will maker dies. It creates a straight forward, even optional, Testamentary Trust for each beneficiary. By establishing a Testamentary Trust Will, your beneficiaries will have the flexibility and choice they need to protect and make the most of the gift they receive from you.

Before establishing a Testamentary Trust Will, you should be aware that there will be ongoing maintenance costs such as accountancy fees for preparation of income tax returns. You should also consider whether the income generated by your estate would be sufficient to warrant a testamentary trust, or whether there are special needs such as a beneficiary with an intellectual impairment.

By using a Testamentary Trust, your beneficiaries have the potential to –

Reduce Tax

  • allows the beneficiary to distribute the income and realised capital gains to a range of people to gain the best tax outcome;
  • the income received by minors taxed at normal marginal tax rates rather than the top rate

Clearly identify an Inheritance

  • keeps the inheritance separate from matrimonial property. In the situation of a Family Law property dispute, an adult child’s inheritance does not go to that child’s former spouse

Protect Assets

  • limiting access to the inheritance by creditors in a situation where the beneficiary could be sued;
  • limiting the assets available to be used to pay creditors in the event of bankruptcy of the beneficiary

If your beneficiaries are of age and do not wish to continue with the Testamentary Trust, they can, subject to your restrictions placed in the body of the document, choose to wind it up. They may also have full control of their own trusts should they wish to. They can control –

  • Who gets the assets
  • Who gets the income
  • How to invest the trust funds, and
  • How long the trust is needed

They can give everything to themselves or pass control to someone else at any time if they want to.

In the case of minor children, you decide when they gain control of their trust and up until then, your executor is in control. When they become of age, they then take control of their own trust.

The trustee can be anyone you nominate, including the executors of your Will, your spouse or partner or your children. The trustee has effective control of the trust, so it is important this is someone you trust to act in the best interests of your beneficiaries.

For more information on whether a Testamentary Trust Will is suitable for you, contact our friendly and experienced Lawyers at Evolution Legal to arrange a no charge, obligation free consultation to see if we can assist you in ensuring your Will is suitable for your needs and wishes.