Estate Planning – Testamentary Trusts

Elderly couple putting will in a box

Depending on your own circumstances, rather than a “basic” will, a will containing a testamentary trust should be considered.

The benefits of the Testamentary Trust include:

  • Income earned from the assets held by the Testamentary Trust can be split amongst the beneficiaries, including children and grandchildren, thereby minimizing taxation. This can also be achieved by an executor varying income to beneficiaries at particular times depending on the circumstances of the beneficiary(s).
  • Asset protection benefits can also be achieved as the assets in the Testamentary Trust are not treated as assets owned by a beneficiary.  This will offer protection in a bankruptcy situation, or where there is a subsequent marriage of any beneficiary. Further asset protection outcomes can result through capital not being distributed and remaining in the testamentary trust (for income generating purposes for instance).

Estate planning considerations go hand in hand with reviewing one’s will. In practical terms, this often takes the form of reviewing the terms of a family discretionary trust deed, and what will happen in the event of death of the appointor of the trust. In this regard, it is critical that the precise terms of the trust deed are followed in considering any amendments to ensure that the proposed amendment of the trust deed is effective and that a re-settlement of the trust does not result, so as to cause unintended taxation consequences.

It is often the case, that in the event of the death of the appointor of the trust, that person’s spouse is added as the new appointor, and sub-trusts are thereby created for the child or children. This will create a degree of certainty for the family members in terms of the benefits of the family trust assets which will flow to particular beneficiaries of the family trust.


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