Will with a Testamentary Trust

A Will with a Testamentary Trust offers more benefits than a standard Will

If you want to make sure the beneficiaries of your hard earned wealth don’t ‘blow their inheritance in one hit’ or if you want to prevent your assets from being divided by the Family Court in a divorce, then a Will with a Testamentary Trust may suit your objectives.

A Will with a Testamentary Trust is a Trust that is created under a Will. The Trust does not come into effect until the Testator dies. The Testamentary Trust offers more benefits that a mere standard Will. Some of the benefits include:

  1. Flexibility for Beneficiaries

A Testamentary Trust gives the beneficiaries flexibility and control over when and how they will take their inheritance.

  1. Protection of Assets
  • Divorce/breakdown of beneficiary’s relationship. If any beneficiary is in a relationship that could potentially end up ‘on the rocks’, and, if the assets are held in a Testamentary Trust, then the assets of the Trust are not classed as ‘assets of the marriage.’  Hence, the Family Court cannot make a distribution of the assets in the Trust to the soon to be ex-spouse.
  • Creditors. If a beneficiary is or could likely have a number of creditors (ie. from operating a business) and the beneficiary is at risk of being made bankrupt, the Testator can prepare the Will so that inheritance is not at risk of being given to creditors or a Trustee in bankruptcy.
  • Vulnerable beneficiaries. If any beneficiary is a spendthrift or suffers from gambling, drug or alcohol addiction, the Testamentary Trust can ensure that the assets remain in tact for the benefit of the beneficiary without the beneficiary depleting the asset.
  1. Tax Advantages

Testamentary Trusts are useful from a taxation perspective. The offer:

  • The ability to split income to different beneficiaries to optimise taxation benefits; and
  • Tax savings for beneficiaries under the age of 18.

Given all the benefits that a Will with a Testamentary Trust offers compared to a standard Will, the question is not “why consider a Will with a Testamentary Trust.”  Rather, the question is “Why would you not consider a Will with a Testamentary Trust”?