What is a Testamentary Trust?
A Testamentary Trust (also called a Testamentary Discretionary Trust or TT or TDT) is a Trust that is set up in your Will and ONLY comes into effect on your death.
How is it different to my Family Trust?
If you have a Family Trust set up you may feel like you are familiar with how trusts operate and the potential tax advantages. However, a Testamentary Trust is very different to trusts such as Family Trusts which are set up while you are alive. This is because the law acknowledges that when a Testamentary Trust is created, it means that someone has died and so it hasn’t just been set up to try and minimise tax.
What are the benefits?
A Testamentary Trust can operate for up to 80 years in all States and Territories except South Australia where they can operate indefinitely. This means that if you set up a Testamentary Trust in your Will it can operate for many generations to come. Why does that matter? Well, minor children (under the age of 18) or adult children who are not working are able to receive income distributions from the Testamentary Trust and utilise tax free thresholds and low income tax offsets, which generally means around $20,000 per child per year can be distributed tax free. However, this benefit is only something that you can get from a Testamentary Trust and it must be set up in your Will before you die – so don’t wait until it’s too late!
There are new laws around distributions to minors and this excepted income for tax purposes (which we will do a Blog about soon).
You can also potentially save on Capital Gains Tax with the use of a Testamentary Trust too.
If you operate a business OR if you want to protect the money you leave behind from your spouse and/or children’s future partners – a Testamentary Trust can offer you protection. A Testamentary Trust offers protection from Bankruptcy and can protect from future Family Law proceedings for any future relationship break downs (as far as the law will allow).
If someone is on an aged pension!
Have you thought about how leaving your money to someone who is in receipt of an aged pension at the time you die may affect their entitlements? The asset test may mean that your beneficiary loses their entitlement to receive the aged pension. A Testamentary Trust can help with this where the ultimate purpose is for the money to be left to the beneficiary’s children and/or grandchildren.
Testamentary Trusts are tailored to your unique circumstances by our lawyers so that we can ensure they maximise any benefits available and are set up to reflect your intentions.
If you operate a business and feel that the potential advantages of a Testamentary Trust may be of benefit to your clients – we have a Testamentary Trust Fact Sheet that we can provide to you free of charge that you can pass onto them. Contact us to request one!
We offer no cost, no obligation initial appointments so that you can find out where you stand and exactly how much it will cost you to get your Will and/or Estate Plan sorted. We offer fixed fees and payment plans - your wishes, your way.
Don't wait until it's too late, contact us today!
Phone 1800 22 33 90
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