When in doubt, use a testamentary trust!
No longer for the super rich, a testamentary trust is simply a trust set up in a will that starts only when the will maker dies.
What are the benefits of using a Testamentary Trust?
A testamentary trust can be a helpful way to protect your dependants as well as potentially help them achieve certain tax outcomes in regard to income earned from any inheritance you leave them.
An example: minors could receive approximately $22,000 tax free income each year from investing the inheritance. That’s fantastic tax flexibility! In fact, this is the only environment where you can get such great tax treatment, and it’s only because someone had to die for the trust to start. Testamentary Trusts are not administratively onerous either – and we’re happy to guide you through the stages.
Who should use a Testamentary Trust in their will?
If you answer YES to any of these questions, a Testamentary Trust is a must:
Are you leaving at least $500,000 (including superannuation and life insurance) to one or more people?
Is it important to you that the inheritance is protected from relationship risks (e.g. divorce or separation?
Do you want to protect the inheritance from bankruptcy risks?
Are you leaving assets to a beneficiary who cannot be trusted to manage their inheritance appropriately?
Testamentary trusts are created by a will to provide a greater level of control over the distribution of assets to beneficiaries. There are also tax advantages available through testamentary trusts, making them an effective estate planning tool.