Why a Testamentary Trust in a Will?

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There are a number of legitimate reasons to include a testamentary trust in a Will. The benefits include, but are not limited to:

(i) Providing a gift to a beneficiary with a disability, that may not be able to manage their own affairs. The Will maker may want to ensure that the beneficiary may benefit from the income of the fund during their lifetime, with the capital to go to another beneficary on their death.

(ii) Protection of the capital of a fund from a spendthrift beneficiary, or a needy but drug or alcohol dependant child, where the Will maker wants to provide an allowance supplied on a regular periodic basis, rather than a larger lump sum amount that may be squandered.

(iii) Gifting income to grandchildren that are infants (i.e. under 18 years old) in a tax effective manner so that they take the income from the Trust to pay school fees and other necessities of life, with the full taxation benefits of s102AG of the Income Tax Assessment Act. The child or children can each benefit from the full tax free threshold of $18,200.00, rather than a spouse receiving the entirety of the benefit with only one tax free threshold, but still have the responsibility to support the child or children in after tax funds.

(iv) Protection from a Trustee in Bankruptcy may be achieved by leaving a benefit, that may otherwise have been absolutely given to a beneficiary that may become bankrupt, to a Trustee holding the assets in a discretionary trust. If properly drafted a Trustee in bankruptcy cannot access the assets of a Discretionary Trust.

(v) Limited protection from a beneficiaries spouse in a Family Law Property matter may be achieved, however the Family Court is most likely going to view any income stream from a Testamentary Trust, as a financial resource, and adjust a property settlement from other assets in the pool of joint matrimonial assets.

If you believe that a Testamentary Trust may be of interest to you, please raise the issue with one of our experienced Solicitors at Bridge Brideaux. A specifically tailored advice will be provided, that may incorporate a Testamentary Trust as part of your Succession planning solution.