6 reasons why you should consider putting a Testamentary Trust in your Will

In our last blog we explained what a testamentary trust will and below we explore some of the reasons why you should consider incorporating a Testamentary Trust into your Will. If you are reading this post and haven’t read our last article, please click back and have a read for further information on what a testamentary trust Will is.

A testamentary trust Will can provide a family benefits for generations and some of the key reasons to consider one are:-

·         Tax Reduction  

There are often tax advantages in taking an inheritance through a testamentary trust in that the beneficiary has a discretionary power to distribute income and/or capital amongst a wide range of potential beneficiaries. This can be particularly useful is a beneficiary has a high personal marginal tax rate or they have a partner on a lower income. It can also be useful if a beneficiary has children and grandchildren.

There can also be benefits with respect to the streaming of capital gains tax and stamp duty on transfers may also be able to be reduced

·         Superannuation and Insurance Proceeds

A testamentary trust allows for superannuation and life insurance proceeds to be dealt with in a more tax effective way. For example, in the absence of a testamentary trust, tax of up to 31.5% (usually 16.5%) may apply to the full value of your super payout as a result of your death. A testamentary trust can provide flexibility with any superannuation paid to your Estate therefore allowing the preferred tax status of the proceeds.

·         Staggering payments over time

A testamentary trust will is said to be the closest thing to “ruling from the grave”, particularly as it applies to your children. A trust will can provide a high level of control and certainty as to when a child gains access to a particular asset and for what purpose.

·         Wealth Protection

A testamentary trust can help protect your assets when they pass to your beneficiaries. Without a trust will, any asset that passes to a beneficiary can immediately become available to any person that may have a claim against that beneficiary, for example an estranged spouse or a creditor. Whereas if the assets fall into a trust structure, they benefit from a higher level of protection from such claims.

·         Maintaining assets within your lineal descendants

A testamentary trust can be used to give your spouse control over the annual income from the assets but at the same time ensure that the asset will ultimately pass to our children, and in turn your grandchildren. In other words, down your blood line.

·         Reduced likelihood of claims against the Estate

Family provision claims are on the rise in NSW. If a beneficiary inherits from a will and are gifted an outright asset, this may potentially allow for a disgruntled beneficiary to argue that they have not been adequately provided for. A testamentary trust on the other hand does not allocate assets to a single beneficiary but rather a range of beneficiaries. This can be structured to include a potentially disgruntled beneficiary. It therefore becomes significantly more difficult for a disgruntled beneficiary to bring a claim until the trust has been fully administered.

There are a number of considerations when it comes to including a testamentary trust in your will and if you would like to discuss your circumstances, please get in contact with our team today.