TESTAMENTARY TRUSTS
A testamentary trust may be the most effective way a benefactor - especially a parent or grandparent - can help their beneficiaries manage assets and minimise tax on their estate. It is an important addition to a standard will. Your assets are placed in a trust instead of being distributed to specifically nominated individuals. You appoint a trustee within the will, and they determine how much each beneficiary will receive and when they receive it.
FREE 10-MINUTE ASSESSMENT
Call us now with the approximate value of assets and liabilities. Leave the calculations to us, and within 10 minutes our legal team will know if a testamentary trust may be of benefit to you.
ADVANTAGES OF A TESTAMENTARY TRUST
Two problems may occur with a standard will where specific people are nominated to receive exact asset amounts:
1. You leave an unnecessary tax liability to your beneficiaries.
- Suppose a grandparent leaves $1 million to his daughter, whose usual salary is $80,000 p.a. The daughter will have to pay tax on the interest earned on her father's estate. If the $1 million produces $70,000 p.a. in interest, the daughter will have to pay an additional $27,600 in tax every year.
- Suppose, instead, the grandparent had placed his estate in a testamentary trust and named his daughter as trustee. The $1 million still produces $70,000 p.a. in interest, but if the daughter's three underage children - the grandchildren - had been named as beneficiaries, the tax payable will be just $6,000. That's nearly $22,000 less tax every year.
2. Your beneficiaries may receive a large amount of assets (money) before they have the maturity to deal with it.
- Suppose the grandchildren receive their large endowments as soon as they turn 18 and consequently waste their new found wealth. Obviously, this not what their grandparent would have wanted.
- Suppose, instead, the daughter can withhold large sums from the grandchildren until they become responsible in money matters. That's a much better outcome for everyone.
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