Unlike a trust created by a Trust Deed executed during your lifetime, a Testamentary (Family Will) Trust does not come into effect until death. This form of trust is recommended in estate planning to deliver tax advantages and asset protection for your family.

The Advantages of a Testamentary (Family Will) Trust

Tax Advantages

There are tax advantages available in a Testamentary (Family Will) Trust where income is distributed to minor beneficiaries. The applicable beneficiary will be entitled to the adult tax free threshold and low income tax offset for income streams to that beneficiary from the Trust.

Flexibility

No child will be disadvantaged by taking an inheritance through a Testamentary (Family Will) Trust, as the child may either exercise a right given by the Will to take the inheritance personally, as opposed to through the Trust, or the child may elect to vest the Trust at any time.

A child may, with the consent of the Trustees, take capital distributions from the Trust at any time or have distributions made to another family member within the class of General Beneficiaries. In this regard, there may be flexibility in distributing income, taking into account the tax position of each family member.

Protection of Assets

Testamentary (Family Will) Trusts may be of great advantage where there is a family member who is in an unstable relationship, inclined towards gambling, under the influence of drugs or alcohol, at risk of being declared bankrupt or in an occupation where they may be the subject of a claim. While the assets are held in the Trust, they are not assets of the child and can remain in that state to protect them.

Use for Education

Many grandparents are taking the opportunity to set up a Testamentary (Family Will) Trust with the specific intention of assisting in the education of their grandchildren. This is achieved by money being allocated to grandchildren for the purposes of their education rather than it being passed through the parent at normal tax rates.

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