What is a Testamentary Trust?

A testamentary trust is incorporated in a Will and does not come into force until the passing of the Will maker. The Will maker can decide which assets are held in the trust or can leave that discretion to the executor to consider what is most appropriate at the relevant time, and who will receive them. A testamentary trust may provide tax advantages for the beneficiaries, as well as asset protection benefits.

Testamentary trust is designed to protect the Will maker's assets because they belong to the beneficiaries’ trust rather than the individual. This allows flexibility for how capital and income generated by those assets is distributed

The Trustees who decide how the income is distributed can also be beneficiaries of the trust. However, the Trustees must act in accordance with the provisions set out in the Will regarding how the trust is to be managed.



Types of Testamentary Trusts

There are a number of different types of testamentary trusts, but two of the most common ones are:

• Discretionary testamentary trusts. Executor gives the beneficiary the option to take part or all of their inheritance via a Testamentary Trust. The primary beneficiary has the power to remove and appoint the trustee and they can appoint themselves to manage their inheritance inside the Trust.

The Australian Taxation Office (ATO) advises can be used in some cases for certain tax outcomes and asset protection.ul>It is a separate trust to the deceased estateThe trustee has the discretion to distribute capital and/or income between a group of beneficiaries nominated in the will

• Protective testamentary trusts. Beneficiary must take their inheritance via the Trust and does not have the option to appoint or remove trustees. This is generally established for the benefit of someone who is otherwise unable to manage their own affairs.

A testamentary trust can hold a wide variety of different assets. It can be established using specified assets, a designated portion of your estate or the entire balance of your estate. You can even establish multiple trusts in the one will, which means you could have trusts with different provisions to meet the different needs of your beneficiaries.

If you would like to find out more about testamentary trust or about your rights and obligations, Straits Lawyers are here to help. Simply send us an email at info@straitslawyers.com or give us a call on 8410 9069 to arrange an appointment for an interview.

Alternatively if you would like your Will to be drafted, Straits Lawyers are now offering online Will services. To access these services, simply click on the link – https://straits-lawyers.square.site/product/online-will-/1?cs=true

Please note that this article does not constitute legal advice and Straits Lawyers will not be legally responsible for any actions you take based on this article.