A Testamentary Trust provides additional protection for assets you plan to gift by your Will and may minimise taxation.

A Testamentary Trust is a trust established by your Will that is set up after you die. The trust will hold assets for your beneficiaries however these assets will be managed by your appointed Trustee according to the trustee powers you give them. The Trustee may for example restrict the beneficiaries' access to the capital in the trust by only distributing the income generated and/or distributing percentages of the capital after certain periods of time. The trust will exist for the length of time you set until it vests (comes to an end). When the trust vests, the assets will all be distributed to your beneficiaries.

The primary advantages of Testamentary Trusts are:

  1. To achieve advantageous tax outcomes; and

  2. To protect assets.

A discretionary trust could be established by your Will to minimise the tax due to the Australian Taxation Office on the total sum. This could potentially be achieved by the Trustee paying sums to different beneficiaries who have different income levels thereby splitting the funds across different individuals to capitalise on individual income tax thresholds.

A protective trust could be established to protect assets where:

  • a beneficiary is unable to manage their financial affairs themselves or is prone to taking high financial risks;

  • a beneficiary may have debts that creditors are looking to recover;

  • a beneficiary is involved in a financial separation such as after a divorce; or 

  • family members disagree on use of finances and may try to exercise financial control over a beneficiary.

The cost of making a Will with a Solicitor that includes a testamentary trust is more than the cost for a standard Will however Lightning Legal offers competitive prices. Contact us for a quote based on your needs.

Contact Lightning Legal for advice in your estate planning.

© 2020 Sandra Dianne Stuart, Lightning Legal

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