Our firm has previously highlighted the importance of preparing a Will, however, there are some situations where a standard Will may not be the most effective way to distribute your estate. In matters that involve large estates, a number of beneficiaries, or where the beneficiaries are in risky occupations, testators should consider making a Testamentary Trust.

What is a Testamentary Trust?

A Testamentary Trust is a trust created under a Will that comes into effect following the death of the testator. The Testamentary Trust is a favoured estate planning arrangement because it provides many benefits for the beneficiaries upon the death of the deceased. The Will of the deceased essentially doubles as a trust deed, which usually establishes a trust for each primary beneficiary, outlines the power that the beneficiaries and trustee’s have under the Will and disburses the testator’s property into the nominated trusts.

Pursuant to most Testamentary Trusts, the beneficiaries have control of the assets, however, the assets will not form part of the beneficiary’s personal property, which is advantageous for a number of reasons.

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. However, 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 future. By transferring the assets of the deceased into a Testamentary Trust controlled by the beneficiary, the assets will likely be safe from creditors.

Separation from Partners

Similar to creditors, an inheritance transferred through a testamentary trust is unlikely 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, courts are reluctant to include assets of the Testamentary Trust in a Family Court order. The Testamentary Trust is a particularly beneficial tool that can ensure, for example, a family house or valuable shares stay within the family for future generations.

Taxation Benefits

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. 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.