A Traditional Will allows you to:
The beneficiaries of a Traditional Will have no choice other than to take their gift in their own name or refuse it altogether. This lack of choice may cause tax and other problems.
A testamentary trust is simply a trust established in a will and does not come into existence until the Will maker dies. Until then your Will has no effect and you can change it at any time.
The Testamentary Trust Will creates simple optional testamentary trusts for each beneficiary.
The Testamentary Trust Will does everything a Traditional Will does, plus it gives your beneficiaries the flexibility and choice they need to protect and make the most of their gift from you.
The use of a Testamentary trust gives the beneficiary the potential to:
If your beneficiaries are old enough they can choose either to use the trust or to wind it up.
The beneficiaries who are old enough can have full control of their own trusts if they wish. They can control:
They can give everything to themselves or pass control to someone else at any time if they wish.
You decide when the younger children gain control of their trust. Up until then your executors are in control. Naturally, until the child reaches the required age, your executor can make funds available from the trust to meet your child's needs.
You can nominate anyone, including the executors of your will, your spouse or partner, or your children. The trustee has effective control of the trust, so the trustee should be a person who you trust to act in the best interests of those who are to receive the main benefit of your estate that will be left subject to the testamentary trust. It is possible to establish a number of testamentary trusts under a will and name different trustees for each of them.
If your spouse is a beneficiary of the testamentary trust, the trustee could pay all or part of the capital and/or income to your spouse.
Yes. There are several. A testamentary trust could also protect beneficiaries from creditors, or litigants in professional negligence claims and can also protect spendthrift or intellectually impaired beneficiaries. And beneficiaries involved in family court property disputes.
There will be ongoing maintenance costs such as accountancy fees for preparation of trust taxation returns. Factors that you should take into account, include a consideration of whether the income generated by your estate would be sufficient to warrant a testamentary trust, or whether there are special needs such as a beneficiary with an intellectual impairment.
Yes. Although both testamentary and family trusts have similar features, such as the ability of the trustee to decide which beneficiaries of the trust will receive income, there are considerable taxation advantages for infant beneficiaries (for those under the age of 18 years) under a testamentary trust. Even if testamentary trusts are taxed differently at some future date, there may still be significant tax or other advantages to your beneficiaries if you include a testamentary trust as an option.
If you have a beneficiary who has an intellectual impairment, you could leave part of your estate for that person's benefit by naming that person as the primary beneficiary (but not a trustee) of a testamentary trust. This will prevent unscrupulous persons from taking advantage of the beneficiary with an impairment and protect his or her share of your estate. Either a family member, professional adviser or a trustee company could be named as the trustee of this type of testamentary trust.
The assets of your family trust will not form part of your estate. If all assets are presently owned by your family trust, there would be no point in establishing a testamentary trust unless you planned to wind down your family trust and transfer the assets in it to yourself. It would be sufficient to ensure that control of the family trust offers your death
You should consult your accountant, solicitor and/or financial adviser, to ensure that you are aware of all the advantages and disadvantages (some of which will undoubtedly depend on your own particular circumstances, both financial and family, before you make your decision).
Alternatively, a testamentary trust can simply be included as an option in your will to cater for future changes in your circumstances or those of your beneficiaries.
Our fees for preparing standard Testamentary Trust Wills start at $1,350.00 plus GST for a single Will and $1,900.00 plus GST for wills for couples.
For advice on Wills and Estates and Testamentary Trusts, please call or email: