No one enjoys talking about what happens when someone dies and what happens to their money, but sometimes this is an important discussion to have. Especially when it comes to what you will do with your estate and if a testamentary trust is for you. A testamentary trust is a trust that is established by a will. It does not come into effect until after the person who made the will passes away. At this point in time, specified deceased estate property is transferred to a trustee who holds the assets on trust for the benefit of the beneficiaries. The trustee is the person you have appointed to be the controller of the trust and selecting this person is an important decision.
A testamentary trust may last for many years after the deceased estate has been fully administered. Testamentary trusts allow you to take greater control over your estate and allows your family to benefit for generations. Some reasons why you should consider testamentary trusts include:
- Wealth protection – When an assets passes to a beneficiary, this immediately becomes available to any person who makes a claim against that beneficiary, for example, debt collectors, ex-spouses from divorce or other relatives. Passing the assets into a testamentary trust allows the assets to benefit from a higher level of protection from such claims. This provides great wealth protection and ensures that the assets in the trust can’t be claimed from external parties.
- Keep assets in the family – This trust can be used to give the spouse control over the annual income from the assets and ensure the assets will ultimately be passed down to your children. The trust will also ensure that your children will have a say in how and when the assets are disposed and what happens to the cash.
- Tax rates for kids – Children under 18 qualify for tax concessions that they may receive from a testamentary trust instead of the higher flat tax rate from an ordinary trust (around 50%). This makes testamentary trusts a great tax measure for those under 18.
- Provide for several generations – An ordinary will would generally provide that all the assets be transferred to the surviving spouse. The establishment of a testamentary trust allows the assets to be transferred to a trustee and then administered for the benefit of successive generations, giving you more freedom and control.
- Distribution of income and capital – The trustee of the testamentary trust can distribute the income of the trust to any one or more of the general beneficiaries, allowing the trustees to distribute the income in the most tax effective manner.
For more information on testamentary trusts or to take the first step to set up your own, please get in touch with the team here at Fortis Accounting Partners. You can reach us on 02 9267 0108, or via info@exemplary-financial.flywheelsites.com.
