Testamentary Trusts

What is Testamentary Trusts?

A testamentary trust is set up in your will and only comes into effect when you die. No stamp duty or taxes are payable when the trust is set up. The terms of the trust can easily be amended when your will is updated.

There are a number of different types of testamentary trusts including discretionary trusts, special disability trusts, protective trusts, charitable trust and life interest trusts.

What are the Advantages of a testamentary Discretionary Trust?

  • Income can be split between a number of beneficiaries in a tax effective manner
  • The assets within the trust structure can be protected from claims including bankruptcy and relationship breakdowns, with additional asset protection where the trustee is totally independent
  • The trust also makes it possible to transfer to different beneficiaries the right to use and enjoy trust assets without paying transfer costs such as stamp duty and capital gains tax
  • Unlike traditional family trusts adult tax rates apply to income distributed from testamentary trusts to minors
  • Income can be split between a number of beneficiaries in a tax effective manner
  • The assets within the trust structure can be protected from claims including bankruptcy and relationship breakdowns, with additional asset protection where the trustee is totally independent
  • The trust also makes it possible to transfer to different beneficiaries the right to use and enjoy trust assets without paying transfer costs such as stamp duty and capital gains tax
  • Unlike traditional family trusts adult tax rates apply to income distributed from testamentary trusts to minors

Discretionary Testamentary Trusts

One of the most commonly used trusts is the discretionary testamentary trust. A discretionary testamentary trust is suitable for anyone who has children and/or grandchildren who can benefit from the income splitting opportunities available with these types of trusts.

These trusts are also suitable for will makers who would like to offer asset protection to their beneficiaries and the inherited assets.

One of the most commonly used trusts is the discretionary testamentary trust. A discretionary testamentary trust is suitable for anyone who has children and/or grandchildren who can benefit from the income splitting opportunities available with these types of trusts.

These trusts are also suitable for will makers who would like to offer asset protection to their beneficiaries and the inherited assets.

Matters To Consider

If you decide to put a testamentary discretionary trust in your will it is important that the trustee is given as much flexibility as possible when managing the trust assets. For this reason, a will setting up a discretionary testamentary trust is often complex and resembles a trust deed.

Testamentary discretionary trust wills are more costly to prepare than standard wills, however the benefits should more than outweigh the complexity and cost of preparation.