What assets can go into a testamentary trust?

Any asset can be held in a testamentary trust.

However, the definitions within the Will should be all-encompassing to provide the appropriate authority to the executor to assume control over whatever the Will owner’s assets were at the date of death. Will Wizard includes very broad definitions to give executors this authority. 

There are assets that a Will does not automatically control, and professional financial advice may be needed to ensure that these assets form part of your estate.

Jointly held assets: On the death of one co-owner, a jointly held asset goes directly to the survivor by-passing the Will completely. It may be advantageous to change the asset to tenants in common so that at least one half of the asset can be held in a testamentary trust.

Superannuation benefits: The trustee of your superannuation fund may have the final decision as to who gets your superannuation. You may influence the result by completing a ‘binding death benefit nomination’.

Assets held under a trust: The terms of the relevant Trust Deed cover what happens to the control of the Trust and the assets held by the Trust on your death. Wills from Will Wizard provide the executor with authority to seize control of such assets, but only if the discretionary trust deed allows it. Seek professional accounting or legal advice if you are unsure whether your discretionary trust deed allows for this.

Life Insurance: The proceeds of any life insurance policies unless you have nominated your estate as your beneficiary.

Shares: The shares you hold in a private company may be incapable of transfer without the consent of other shareholders.

 

 

What about jointly held assets?

The most common way of a couple owning their home is as ‘joint tenants’ which means that on the death of the first co-owner, the survivor becomes the sole owner as a jointly held asset goes directly to the survivor, bypassing the Will completely. 

 

This gives rise to the risk of losing part of, or the whole home, if the survivor, or their estate, is sued by a future domestic partner or a creditor following a relationship breakdown or money troubles.

 

An alternative approach is to change the title to ‘tenants in common in equal shares’, a tax-free low-cost procedure, which means on the death of a spouse, the survivor can hold the deceased partner’s share of the home under a right of occupation as provided by all Wills from Will Wizard which protects at least that part of the home from such third party claims.

We always recommend that you seek professional tax and legal advice.

 

What are trust liabilities?

Liabilities of the trust may include any loans owed, e.g. to beneficiaries, and any other debts incurred by the Trustee in the administration of the trust. Please note that transfers of assets from the trust to beneficiaries are disposals and acquisitions for capital gains purposes (even if the legal owner does not change). Some transfers from the Trust to beneficiaries could attract stamp duty. Seek legal and tax advice.

 

Do I specify which assets go into a trust for beneficiaries?

No. Modern Wills like those provided by Will Wizard do not list specific assets. Instead, modern Wills provide broad definitions of what an asset can be and instruct executors to seize control over whatever the Will owner’s assets may be at the date of their death. If a Will includes specific assets you own now, your Will then needs to be updated each time you sell or acquire new assets.

The executor then distributes your assets in either equal or unequal shares as per your Will. Wills from Will Wizard include equalisation provisions that give authority to executors to distribute assets in order to protect equal shares if this was your preference.

All Will Wizard portfolios include an Asset & Loans Record which you may choose to keep updated to assist your executor to understand the nature and location of your assets. 

 

Can I add money to my trust?

Yes, you can add money into an existing testamentary trust.

However, any money or assets you add to an existing testamentary trust will not enjoy the tax and asset protection privileges of a testamentary trust.

Only that part of the estate allocated to the beneficiary by the Will owner enjoys these privileges. As always, seek professional advice as to which assets to add to your testamentary trust.

 

Can a trust lend or borrow money?

Yes, so long as the Will you are inheriting by includes the appropriate terms that allow for this.

 

Will Wizard's terms of trust are sufficiently broad to provide flexibility in how inherited wealth is managed.

 

Below are two examples of specific trust terms related to a trust making loans or borrowing money:

 

...trustees shall have the following specific powers to:

 

x) Make loans to any beneficiary on whatever terms including with or without interest or security;

 

y) Borrow money, either with or without giving security, on such terms as My Executors or trustees of any trusts established under the terms of this Will deem fit and enter into any mortgage, charge, security agreement, lien or security over the whole or any part of any asset;

 

Loans from a testamentary trust should be recorded in financial statements by your accountant or corporate trustee so that repaid loans can be put back into the trust at a later date.

 

The terms of trust included in all Wills from Will Wizard are extremely broad, allowing the trust to be managed almost as if there was no trust at all. The aim is always to give beneficiaries maximum flexibility in how they manage their trust over time as their needs, wishes and circumstances change.

 

Can a family home be put into a testamentary trust?

Yes, however beneficiaries and executors are directed by our Wills to seek professional financial and/or legal advice before deciding which assets should and should not be placed into a testamentary trust.

The most common way of a couple owning their home is as ‘joint tenants’ which means that on the death of the first co-owner, the survivor becomes the sole owner as a jointly held asset goes directly to the survivor, bypassing the Will completely. 

 

This gives rise to the risk of losing part of, or the whole home, if the survivor, or their estate, is sued by a future domestic partner or a creditor following a relationship breakdown or money troubles.

 

An alternative approach is to change the title to ‘tenants in common in equal shares’, a tax-free low-cost procedure, which means on the death of a spouse, the survivor can hold the deceased partner’s share of the home under a right of occupation as provided by all Wills from Will Wizard which protects at least that part of the home from such third party claims.

We always recommend that you seek professional tax and legal advice.