Ensuring that your assets are going to be protected when you’re no longer around is an important concern for many people. Protecting your estate is one of the few things you can do to provide for your loved ones after you’re gone.
Using a Testamentary Trust Will is more complicated than an ordinary Will, but there are many benefits that your beneficiaries can take advantage of.
Here is an introduction to the features and benefits of using a Testamentary Trust Will.
What is a Testamentary Trust Will?
A Testamentary Trust Will is a type of Will that establishes a Trust or Trusts upon the death of the testator. They are designed to protect the deceased’s assets because they belong to the Trust rather than any individual. This allows flexibility for how capital and income generated by those assets is distributed.
The Trustees who decide how the income is distributed can also be beneficiaries of the Trust. However, the Trustees must act in accordance with the provisions set out in the Will for how the Trust is to be managed.
Why choose a Testamentary Trust Will?
There are many potential benefits of using a Testamentary Trust Will. Generally speaking, the Trust is set up to protect the assets that it holds. This is because the assets in the Trust generally cannot be accessed by creditors, divorcing partners, and even the beneficiaries in some cases.
The Trustee or Trustees can also choose to distribute the income generated by the Trust in a way that minimises the tax burden of the beneficiaries. Depending on the assets, a Testamentary Trust can potentially save tens or even hundreds of thousands of dollars over its lifetime.
How does it work?
There are several ways in which a Testamentary Trust can provide savings and protection to the beneficiaries. These include:
Tax Flexibility – The Trustee or Trustees can distribute the income from the Trust in a way that minimises the tax burden on the beneficiaries.
Unlike a Discretionary Trust, children under the age of 18 are eligible for tax concessions for the income they receive from a Testamentary Trust. This means they are taxed at the same rate as they would be for employment income.
Asset protection – If any of the beneficiaries have financial problems, the funds in the Trust cannot be accessed by creditors since the assets belong to Trust rather than the individuals.
As the law currently stands, spouses and partners are also unable to make a claim on the assets held in the Trust during the property settlement after separation.
Capital gains tax – When property is inherited through a standard Will, capital gains tax is payable either two years after Probate of the Will, if the deceased lived in that property, or when the property is sold, if it was an investment property.
If the property is held by a Testamentary Trust, then the capital gains tax can be spread out to minimise the tax in a manner similar to how the income is spread to minimise tax.
Get expert legal advice
When it comes to protecting your assets and making provisions for your loved ones, it’s essential that you get all the details right.
A Testamentary Trust Will is more complex than an simple Will, and there are more things that can go wrong if there are any mistakes in it. You need to select your Trustee or Trustees carefully and ensure that your wishes are followed.
At Rose Lawyers, we can help you through every step of the process. Our Will and Estate lawyers will help you consider all your options while setting up your Testamentary Trust Will; we’ve been doing just that for our clients for many years.
For help setting up your Testamentary Trust Will, call Rose Lawyers on 03 9878 5222.
Julie is an admitted Solicitor in the Supreme Court of Victoria. She has a range of experience in Civil Litigation, Commercial Law, Family Law, Taxation...
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