In the simplest terms, a testamentary trust is a trust created under a Will which will only come into existence on the death of the Will maker (the “testator”). Testamentary trusts are funded by assets distributed from the testator’s assets (their “estate”).
Why would I create a testamentary trust in my Will?
Testamentary trusts are often established where the testator desires the growth of their assets for the benefit of their beneficiaries. A discretionary testamentary trust can promote the growth of your assets and minimise your beneficiaries’ tax liabilities by allowing your trustee to:
- Split trust assets and income between beneficiaries to minimise tax threshold penetration; and
- Allocate trust assets and income to the maintenance or benefit or a minor to maximise tax savings.
As the beneficiaries of a testamentary trust have no fixed entitlement to the trust assets, assets deposited into the trust for the benefit of it beneficiaries receive limited protection against creditors. This may safeguard trust assets from erosion caused by:
- At-risk professionals such as doctors, lawyers, engineers, or chemists; and
- the insolvency of family members
Further, as the beneficiaries of a testamentary trust have no power to make the trustee distribute trust assets, discretionary testamentary trusts may protect trust assets from erosion caused by:
- Prodigal children; and
- Family disputes – Impartial or majority control of trust assets may help to avert disaster where passions run high and family members may otherwise make decisions that are not necessarily financially sound.
Testamentary trusts may also be used to provide capital for beneficiaries until they attain a specified age or regain or obtain the ability to manage their own affairs.
In this instance the trustee holds the trust assets until the prescribed age or event, and must in the interim provide income for the beneficiary’s education, healthcare and general maintenance in accordance with the testator’s wishes.
The experienced and friendly solicitors of NQ Legal can assist you in setting up your testamentary trust. To book an initial interview with one of our solicitors telephone (07) 4721 0488 or visit our fees page for pricing information.
Please contact us to find out more or to discuss our fixed fees and disbursements.
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