Margherite Walsh
- May 2

Have you Considered a Testamentary Trust Will?

We’re all familiar with the operation of a simple will, where a person’s assets are left directly to their nominated beneficiaries.

However, in recent years, as awareness has grown, people’s financial affairs have become more complex, and the risks of leaving an inheritance directly to a beneficiary personally have become well-known; we’ve seen an increase in testamentary trust wills.

The phrases ‘testamentary trust,’ ‘testamentary discretionary trust,’ TT, and TDT are all just ‘lawyer speak’ for a trust set up in a will that starts when the will maker dies. They are very similar to a family trust (more technically known as a discretionary trust), but a testamentary trust is established by a person’s will and remains dormant, ready to start when a person dies.

Testamentary trusts are one of the most powerful estate planning tools available. Here’s a snapshot of what you need to know about testamentary trusts:

Testamentary trusts may save your family tax after you die
Testamentary trusts offer protection of an inheritance from divorce and bankruptcy risks

Testamentary trusts are not just for complex situations or high-wealth

You only get one chance to access the fantastic estate planning benefits of a testamentary trust – it MUST be in your will when you die

Testamentary trusts are not administratively burdensome

Testamentary trusts only start working if you die – the benefits don’t start until you die, but neither do the (minor) compliance requirements An effective testamentary trust should have many people who can potentially benefit from the assets in the trust (the technical term for these people is beneficiaries), and each beneficiary’s entitlement should be at the complete discretion of the Trustee.

This discretionary nature of the trust is what makes the trust so powerful for asset protection. Because none of the beneficiaries own the trust assets and their only right is to be considered by the trustee, it is very difficult for someone to argue that the assets of the trust belong to any one of the beneficiaries.

What are the key benefits of a testamentary trust?

• Relationship protection• Protects immature beneficiaries• Income tax flexibility• Rule from the grave• Defers tax for overseas beneficiaries• Bankruptcy protection If you’re considering a testamentary trust as

part of your estate planning, get in touch with our Estate Planning Team today.