A Testamentary Trust is a trust created under a Will that comes into effect following the death of the testator.
A Testamentary Trust may offer a higher degree of protection for your beneficiaries over your assets and superannuation against claims being made by estranged spouses/relatives and creditors than a usual Will.
The drafting of a Testamentary Trust is one of our preferred estate planning methods, as it essentially doubles as a trust deed. This allows for a separate trust to be established for each primary beneficiary, and further, allows the document to specify the power that the beneficiaries and trustees under the Will can exercise, as well as enabling the disbursement of the testators estate into each of the nominated trusts.
What are the benefits of a Testamentary Trust?
Protection from Creditors
As mentioned above, Testamentary Trusts are typically highly recommended when beneficiaries are in risky fields of work, where personal assets (such as houses and cash) may be taken by creditors.
Further, due to the increase in bankruptcy and persons signing as guarantors to loans, there is now, more than ever, the possibility that anyone receiving property under a Will could be subject to a creditor’s action in the future. By transferring the assets of the deceased into a Testamentary Trust, the assets could be deemed a barrier to creditors.
Separation from Partners
Similar to creditors, an inheritance transferred through a testamentary trust may not be deemed to form part of the relationship assets in the case of a marriage or de facto breakdown.
Whilst the assets of the Testamentary Trust may be classified as a financial resource of one of the parties and have some effect on the terms and split of the property of the parties and it may be the case that due to the discretionary nature, it is open to the Court to view the property outside of the Family Law Pool. The Testamentary Trust thus can be a particularly beneficial tool that can ensure, for example, a family house or valuable shares stay within the family for future generations.
Although the above features are, in themselves, good reasons to consider making a Testamentary Trust Will, the dominant reason for the popularity of the Testamentary Trust structure is often the tax benefits.
A Testamentary Trust may not be relevant in every situation, however, in many cases they offer valuable advantages over simple Wills.
The above information is of a general nature only, and is not legal advice.
If you have any questions or would like to discuss your options with an experienced estate planning Gold Coast Solicitor, please do not hesitate to contact Affinity Lawyers on 5563 8970.