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Testamentary Trust Wills are an estate-planning tool used to maximise tax efficiency and protect a beneficiary’s inheritance from relationship breakdowns or attacks from creditors.

The Will is a trust deed that comes into existence on the death of the will maker, with the terms of trust being dictated by the Will.

There are a range of different Testamentary Trust Wills, including:

  • Beneficiary Controlled Testamentary Trusts: Rather than your assets going directly to your beneficiary in their personal capacity, it goes to a “box” (trust) where they (“the beneficiary”) hold the “key” (trustee). They have control of the trust but lose such control when there is a risk of bankruptcy or family breakdown. This means the trust assets are protected from creditors and are considered a financial resource for family law proceedings and not a divisible asset.
  • Protective Trusts: are used when one of your beneficiaries may not have the ability to look after their own financial affairs and requires the assistance of others. This is especially important where your beneficiaries have a drug, alcohol or gambling addiction or where your beneficiary needs assistance with dealing with financial affairs.
  • Special Disability Trusts: we are able to assist implement testamentary trust wills where one of your beneficiaries has a disability. There are significant taxation and Centrelink concessions and this should be considered.

One of the most significant benefits of a Testamentary Trust in a Will is the tax concessions it allows. In an inter vivos trust (a trust established whilst you are alive) minors under the age of 18 are not adults for tax purposes meaning that any income derived to the beneficiary is taxed at the highest marginal rate.

A beneficiary of a Testamentary Trust Will however is deemed an adult for tax purposes, meaning that the testamentary trust can distribute income up to the tax-free threshold (currently $18,200.00) to a wide class of beneficiaries.

These documents however are complex and come at an additional cost to the will maker. These Wills may also require an initial visit with a return trip to allow the solicitor sufficient time to discuss your requirements and prepare the documents.

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