The experienced team at Kennedy Spanner Lawyers can help you with trust law, asset protection and testamentary trusts.
What is a Testamentary Trust?
A Testamentary Trust is a trust that is set up within a Will. A Testamentary Trust is often used to provide tax benefits and to protect assets for your beneficiaries. It can be helpful for things like taking care of your family, ensuring someone’s education, or protecting assets for future generations. A Testamentary Trust only takes effect when you pass away.
Creation of the trust
The creation of the Trust is provided for within your Will and does not come into effect until after your death. You allocate assets to the Trust in your Will and also name the Trustee/s. The trustee is the person who will manage the assets in the Trust on behalf of the beneficiaries (the people you want to give your assets to).
Conditions and rules
You can set specific rules and conditions for how the assets in the trust should be used. For example, you might want to ensure that the assets of the trust are distributed when the beneficiary reaches a certain age or achieves a particular milestone.
Beneficiaries
You also specify who the beneficiaries are – these are the people who will ultimately receive the assets or income from the trust.
After your death
When you pass away, your specified assets are transferred to the trustee of the testamentary trust. The trustee holds and manages these assets for and on behalf of the beneficiaries.
Our experienced team can assist you in tailoring a trust that suits your lifestyle and financial situation, and help you decide which type of trust is the best option for you and your loved ones.
Who can create a testamentary trust?
Anyone who is making a Will and wants to provide for a beneficiary but not give the beneficiary direct control of the gift.
What assets can be placed in a testamentary trust?
Most types of assets can be placed in a testamentary trust, including:
- Cash
- Property
- Investments and shares
- Valuables
Who is the trustee of a testamentary trust?
The Will-Maker (the person making the Will) names the trustee. The trustee is responsible for managing the trust assets and making distributions from the Trust.
Who are the beneficiaries of a testamentary trust?
The Will-Maker also identifies the beneficiaries of the Trust in the Will. These are the individuals or entities that will ultimately receive the income and assets through the Trust.
Can the terms of a testamentary trust be customised?
The terms and conditions of a testamentary trust can be customised to align with your specific goals and wishes. This flexibility allows for a wide range of possibilities, such as setting age milestones for your beneficiaries or specifying how assets should be used.
When does a testamentary trust come into effect?
A testamentary trust is only created after you pass away. Prior to that, your assets are not under the Trust.
Can a testamentary trust be changed or revoked?
While you are alive and still have capacity the terms of a testamentary trust can be varied by changing your Will. However, once you pass away, the testamentary trust cannot be easily revoked or varied unless the terms of the trust provide for it and all beneficiaries agree. Sometimes the terms of the trust provide for the Trustee to make changes. In some instances a court might vary or revoke terms of a testamentary trust.
What are the benefits of using a testamentary trust?
Some benefits include asset protection, control, tax benefits, providing for minor children, and ensuring ongoing care for beneficiaries with special needs.
Are there any tax implications with testamentary trusts?
Taxation of testamentary trusts varies. It’s essential to consult with an experienced lawyer to understand the tax implications specific to your situation.
How is a testamentary trust different from a living trust?
A testamentary trust is created by a Will and does not come into existence until after you pass away. A ‘living’ trust (an inter vivos trust) is established during your lifetime and operates immediately. Living trusts can be implemented to keep assets out of your estate.
