Written by Jodie Anderson-Bell
Many of our clients have concerns about protecting the inheritance they are passing on to their children from their children’s relationship breakdown or claims from creditors. It is understandable for a person to want the fruits of their labour if not to pass on through the generations, at least to provide a meaningful contribution to their children’s future financial well-being.
One form of protection currently available to parents is the establishment of a testamentary discretionary trust.
What is a testamentary trust?
A testamentary trust is a type of trust that is established under a will. The trust only comes into effect when the will maker dies. The purpose of this type of trust is to separate the legal ownership of the assets in the trust from the person who is the beneficiary.
What are the advantages of Testamentary Trusts?
Control and Flexibility
Testamentary trusts can be established for up to 80 years which allows benefit to be given to future generations. Furthermore, the trustee of the trust has the discretion to distribute capital from the trust to one or more of the beneficiaries and income to provide maximum tax planning depending on the beneficiaries’ circumstances.
Assets held in a testamentary trust may be protected from the division of marital assets in the case of a marriage or de-facto relationship breakdown.
Under the current tax legislation, trustees have the discretion to distribute income to beneficiaries who, in that financial year, have the lowest marginal tax rate. For example, a distribution to a minor will receive the benefit of the adult tax-free threshold of $18,200 in 2021-22.
How can a GKS Wills & Estate Lawyer help you?
Testamentary trusts can be an extremely valuable tool when deciding on how to plan your estate. The Wills & Estate Team has extensive experience in the establishment of Testamentary Trusts and can help you determine if this type of trust is right for you.
Having a Will, regardless of your age, is a critical part of your financial plan and one of the most important things you can do for your family.
Did you know that your superannuation does not necessarily form part of your estate when you die?
50% of Basic Wills appointment fees to fund silicosis research through The Common Good (The Prince Charles Hospital Foundation).
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