A Testamentary Trust Will

What is a Testamentary Trust Will?

  • A testamentary trust will is a will that, on your death (or on the death of your spouse or partner), establishes one or more discretionary trusts, therefore it can be thought of as a will and a discretionary trust deed combined into one document.

  • Your testamentary trust will would specify the assets from your estate that are to be transferred into the separate testamentary trusts created by your will.

  • Your testamentary trust will would specify who is to be the trustee of each trust, meaning the person or persons who are to hold the assets of the particular trust, earn income on them, get annual tax returns lodged and decide which of the beneficiaries are to receive income and/or capital from the trust.

  • Your testamentary trust will would specify who are to be the beneficiaries of each trust created by your will by naming the beneficiaries or defining the classes of people who are to be potential beneficiaries (normally your family and lineal descendants).

  • Your testamentary trust will would specify an appointor for each testamentary trust, meaning the person who can hire and fire the trustees and therefore the most powerful person in the trust.

What are the Components of a Testamentary Trust Will?

  • Just like a simple will it is just a bit of paper that you can revoke at any time by destroying it or making a new one. Apart from making the will nothing else needs to be done about it until you die. Only after you die do the trustees of the testamentary trusts have two open a separate bank account for each testamentary trust, get a tax file number, get tax returns done annually and keep a simple book of minutes recording the trustees decisions.

 Why Would I Want a Testamentary Trust Will?

  • A testamentary trust will can give the family you leave behind and your lineal descendants substantial savings in tax because the income of the testamentary trust is taxed in the hands of the beneficiaries who receive it. Therefore, the income earned on the inheritance can potentially be split with family members on lower incomes, thereby taking advantage of their lower marginal tax rates.

  • A testamentary trust will can give your family asset protection for their inheritance by having distributions of income and capital done in a way that takes into account the potential beneficiaries’ changing needs and therefore minimising the ability of creditors to identify those assets as belonging to particular beneficiaries they are suing.

  • A testamentary trust will can give your family asset protection for their inheritance if they are being pursued by an ex-spouse or ex-partner in a family law/divorce property settlement.

  • A testamentary trust will can allow you to give appropriate people control of the inheritance of any of your beneficiaries that do not have good money managing skills, such as if they are financially irresponsible, have gambling addiction, have substance abuse issues, mental health issues, overbearing spouses or partners, or friends who will prey on them or easily defraud them.

  • A testamentary trust will give you peace of mind knowing that you have given your family the best chance to preserve as long as possible the wealth you have accumulated during your lifetime.

 Links:-

 http://www.findlaw.com.au/articles/4226/what-is-a-testamentary-trust-and-should-i-have-one.aspx