A testamentary trust is a flexible trust set up by a Will. Creating a testamentary trust in your Will can have significant advantages for your beneficiaries rather than giving them an outright gift in a standard Will. Without testamentary trusts, a beneficiary receives their inheritance directly in their own hands. By contrast, a testamentary trust involves a trustee holding the inheritance on trust for a number of potential beneficiaries, usually family members or related entities, who are identified in the Will.
What are the benefits?
Testamentary trusts provide protection for beneficiaries who, for a variety of reasons, should not be placed in a position of controlling their own inheritance. This may include beneficiaries who are, disabled, minors, at risk of bankruptcy, suffering an addiction, business owners, high-risk professionals or people at risk of divorce or relationship break-down.
Other benefits of testamentary trusts include tax planning opportunities to assist your beneficiaries with managing the tax that could be payable on their inheritance. This is particularly advantageous if your intended beneficiaries are minors or have their own children. The trusts also provide the ability to control, to a greater extent, how and when your beneficiaries will be entitled to access their inheritance.
Testamentary trusts can take a variety of forms and can be tailored to meet your specific objectives. We will listen to your objectives and understand the potential risks faced by your intended beneficiaries. We will clearly explain your options and provide you with advice and recommendations about:
- Who should be the trustee?
- Who should be the potential beneficiaries in relation to the income and the capital of the trust?
- What powers and discretions are given to the trustee?
- How and when distributions can be made from the trust?
- The ability to make changes to the trust and how control of the trust can be changed.
- When the trust should be wound up.
Testamentary trusts can remain in place for a long time so careful attention is needed to ensure they are drafted to stand the test of time. Testamentary trusts are sophisticated structures that should be specifically designed. Off the shelf trust deeds or DIY options are seldom appropriate.
The expert wills and estate Lawyers at DDCS Lawyers can answer your questions about testamentary trusts and expertly assist you to prepare a will with testamentary trusts, that best meets your interests and preferences.