Testamentary Trusts are trusts created within a Will that only come into effect upon the death of the Willmaker.

Assets under a Will that incorporates a Testamentary Trust pass to the trustee who holds the assets on behalf of the beneficiary or beneficiaries – the assets do not pass directly into the name of the beneficiary.

Testamentary Trusts

Why have a Testamentary Trust?

The advantages of a Testamentary Trust can be quite significant.  They include:

  • Asset Protection (ensuring your estate assets don’t end up in the hands of creditors or your children’s spouses)
  • Tax Advantages (significant benefits in apportioning income between beneficiaries)
  • Flexibility (of distribution of income and capital depending on each beneficiary’s circumstances at any given time)

Testamentary Trusts are recommended when:

  • there are significant assets within the estate;
  • there are concerns over beneficiaries receiving an inheritance into their own name due to possible issues with bankruptcy, gambling or the beneficiary’s ability to handle money
  • there are relationship concerns with beneficiaries
  • a beneficiary has a higher risk of being sued (for example in a high risk occupation such as a doctor, lawyer, or a company director)
  • the beneficiaries will be able to get a significant advantage in being able to split income earned from estate assets with spouse and/or children (particularly where there are minor children)

The benefits of a Will that incorporates a Testamentary Trust is significant and it’s worth having a chat about it with us in more detail.