We all know the importance of creating a Will to protect our hard-earned finances, assets and estate (amongst other things) from being mismanaged upon our death, but what if you want to implement further directives, such as protecting your loved ones from the tax man, a divorcing spouse, or even protecting your loved ones from themselves!!  This is especially the case when your children or grandchildren are under 25 years of age and / or would benefit from a phased release of inheritance, rather than in a lump sum.  Perhaps you want to ensure preservation of your family wealth and heirlooms for generations to come.

Testamentary Trusts can address the above scenarios and provide a host of additional benefits.  Effectively, a Testamentary Trust is a set of directions set up in your Will that appoints a Trustee to manage all the financial resources on behalf of the appointed beneficiary (or beneficiaries) in the way that the Will articulates.

What are the Advantages of Testamentary Trusts?

Testamentary Trusts offer more flexibility than a standard Will. If you are looking for better ways of estate planning and protection of your assets, these trusts are ideal.

Testamentary Trusts offer the Beneficiaries the choice to continue with the Trust (if they have reached the age specified), if this offers a further safe-haven for assets or reduces certain income taxes. Alternatively, they can opt to take their benefit / inheritance in full.

Testamentary Trusts can protect a beneficiary from creditors in cases of bankruptcy (if they are a self-employed), or protection of assets from a partner (business or spouse), they can be ideal for intellectually disabled beneficiaries, or a testamentary trust is the most suitable solution when you know your beneficiary (perhaps due to gambling, or they are a known spendthrift) couldn’t be trusted to handle an inheritance in a lump sum!!

Asset protection is an area where you need to be careful. You may be excluding a loyal spouse or creditor who would normally have a moral claim to these assets.  The Good Will Company can help you make this distinction.

When property is involved, Testamentary Trusts can be used to safeguard successful division or control across the beneficiaries, such as extended family members.

Tax Effectiveness

If a Beneficiary has financially dependent children / grandchildren, any income from a Testamentary Trust can be split between them to minimise tax, as they will be treated as an adult for tax purposes, therefore receiving the tax-free threshold and a lower marginal rate of tax on the remainder each year.

Income splitting for tax purposes is another advantage. Inheritance assets can be maximised for future growth, whilst still under the protection from 3rd parties.

Testamentary Trusts can also be used across different members of a beneficiary’s family for mutual benefit, e.g. Capital Gains Tax.

Superannuation can be addressed in a trust so that a surviving spouse with dependent children can access the proceeds more effectively. Additionally, adult children beneficiaries can receive their parents’ superannuation entitlements in a more tax effective manner.

How The Good Will Company Can Assist you with Testamentary Trusts

Perceived complexity and lack of awareness discourage many people from creating a Testamentary Trust; however, they offer a host of benefits extending beyond those mentioned above. Once established though, and with periodical reviews for changed circumstances, you can rest assured that your legacy will live on for your spouse and / or loved ones.

Our experienced specialists in Wills & Estate planning can assist in the construction of a comprehensive Testamentary Trust Will for you and your family. We will work with you (and your Financial Planner or Accountant if required) to establish how best to maximise the financial benefit your beneficiaries receive and how to address any assets that will be left as an inheritance under a Trust.