What is a Testamentary Trust?


A testamentary trust is a trust which arises upon the death of the testator and is created by their Will.

There are many reasons why you may opt for a testamentary trust over a straight-forward Will, including:


Asset Protection


Assets that are held under a testamentary trust are held and managed by a trustee (as appointed by you) for the benefit of your nominated beneficiaries.

Consequently, the beneficiaries do not own the assets of the trust, they merely obtain the benefit that derives from them.

This structure offers protection to your beneficiaries in the event that they are involved in disputes, such as bankruptcy or family separation, where another party may seek possession of their assets.


Maintaining Family Wealth


Testamentary trusts are a useful tool for maintaining inter-generational wealth.

They can be set up to ensure only lineal descendants and blood relatives benefit from the trust structure preventing in-laws and extended family from obtaining the benefit of those assets.


Protecting Vulnerable Beneficiaries


You may also protect vulnerable beneficiaries by separating the aspect of control and benefit of your assets.

This can be achieved by appointing an independent person to be the trustee of the trust(s) rather than the beneficiary themselves.

When an independent person is appointed as the trustee, there is a clear separation of control and benefit, allowing the trustee to make appropriate and sensible decisions with respect to the assets.


Tax Savings


Ownership of assets through trusts is an effective way to minimise tax, not avoid tax.

Where a beneficiary receives an inheritance in their personal name, they may be subject to capital gains tax at their personal marginal tax rate.

A minor beneficiary of the trust, under the age of 18 years, is treated as an adult for tax purposes, meaning they can receive $18,200 before paying tax.


Tax Flexibility


A testamentary trust structure allows you the flexibility to distribute any income gains, capital gains, and franked dividends from your estate in the most tax-efficient way possible.

You may distribute the above to your beneficiaries to minimise the tax payable.

Contact Us


For more information, contact Bambrick Legal today. We offer a free, no-obligation 15-min consultation for all enquiries.

You can also read more about our Estate Planning services here.

Related Blog – What is an Executor & Choosing an Executor

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