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  • Writer's pictureTim Purcell, Founder

Why do all Wills from Will Wizard provide testamentary trusts?

Don't panic

"We don't provide basic Wills for the same reason why Toyota doesn't provide cars without seatbelts. Misfortune occurs, and we care what happens when it does."

We only provide Wills that provide beneficiaries with the option to utilise testamentary trusts for the same reasons why solicitors, accountants and financial advisors advise their clients to rely on such Wills.

The long-term asset protection and tax advantages of providing discretionary and individual beneficiary controlled testamentary trusts (BCTT) to surviving spouses/partners and children are simply too important to NOT provide them as an option.

To choose a basic Will over a Will that provides the option for testamentary trusts is like choosing a car without seatbelts, just in case you don't need them, despite there being practically no difference in cost. The potential benefits of seatbelts are so incredibly meaningful to your family, just as protecting inheritances during a divorce and minimising tax will be. Providing BCTT options, along with other sensible risk minimising provisions, are now considered standard for any comprehensive modern estate planning Will. There is no sound rational argument for not providing these wonderful options to the people you love, especially as the difference in cost between so-called 'simple' Wills and comprehensive testamentary trust Wills is now so minimal.

But the real nail in the coffin of the argument that 'my family won't need them' is that the future needs, relationship circumstances, financial problems and tax status of surviving spouses, children and grandchildren are impossible to predict.

This uncertainty makes including all possible and optional risk minimising provisions in your Will the only rational way to go.

We don't provide basic Wills for the same reason why Toyota doesn't provide cars without seatbelts. Misfortune occurs, and we care what happens when it does.

Why are testamentary trusts so recommended?

Testamentary trusts are widely recommended by Australian solicitors accountants and financial advisors because they are inexpensive to run and provide extremely valuable asset protection and tax minimisation opportunities to beneficiaries.

Inheritances are protected from family law claims Testamentary trusts protect a beneficiary who is experiencing family law difficulties. With the inheritance held in a testamentary trust, the primary beneficiary can isolate inherited assets from personal assets. This helps to protect their inheritance from family law property proceedings following a divorce or a de facto break-up. Inheritances are protected from bankruptcy Testamentary trusts protect your beneficiaries from the repercussions of bankruptcy. Since the assets are not owned personally by the beneficiary they do not form part of the beneficiary’s personal estate. A creditor or other person claiming against the beneficiary, therefore, cannot obtain the assets held in the trust. Significant income tax savings for beneficiaries Testamentary trusts give a beneficiary the option to reduce personal income tax by splitting income from the investment of the inheritance between a range of family members on low tax rates. The trustee of the testamentary trust (normally the primary beneficiary) has complete discretion to determine who receives the income of the trust. Tax is paid on the income of the trust at the marginal tax rate of the beneficiaries who receive it. Therefore, by selecting beneficiaries on low marginal tax rates, the trustee can minimise the tax liability of the trust. The trustee can choose to distribute income to minor beneficiaries of the trust with each beneficiary being able to receive up to $18,200 of income tax-free to pay for education and living expenses. For a one million dollar estate that is invested for a modest 5% return, this equates to $50,000 income per year, which if distributed among children or low-income family members could equate over ten years to half a million dollars tax saved for the benefit of your family rather than the ATO. Significant capital gains tax savings for beneficiaries. Testamentary trusts also provide the opportunity for beneficiaries to minimise Capital Gains Tax which arises from the sale of assets. Capital Gains Tax is not triggered when an asset belonging to you passes via your Will to your executor or the trustee of a testamentary trust. Also, there is no Capital Gains Tax when your assets are transferred from the trustee of a testamentary trust to a beneficiary. As with the income of the trust, the trustee can select which of the beneficiaries of the testamentary trust should take the capital gain. By choosing to distribute the capital gain to a beneficiary on a low or nil income, the capital gains tax liability can be significantly reduced. Holding the assets of an estate within a trust offers the beneficiaries an opportunity to defer the need for the sale of assets (and therefore capital gains tax) until later when more numerous beneficiaries come into existence. Tax that is deferred is tax saved. Summary Testamentary trusts substantially protect inherited wealth from a host of common problems and circumstances that lead to inherited wealth being lost, confiscated and wasted, such as; - A divorce; - A de facto relationship breakdown; - A bankruptcy; - Being sued professionally; - A business failure; - Debts to creditors; - Other money problems; - A mental health issue; - A drug or gambling addiction. Testamentary trusts also provide opportunities to: - Minimise income tax; - Minimise capital gains tax; These extremely valuable protections and financial advantages can last for 80 years.

Testamentary trusts are also able to be passed across generations creating a long term protected financial legacy for your family. Testamentary Trusts are how smart Aussie families keep their wealth in the family.

I hope you found this information useful.

We've made relying on comprehensive Wills that provide loved ones with testamentary trusts simple to arrange.

If you have a specific question please submit a ticket or request a call-back :)

We’d love to hear from you.

Will Wizard Co-Founder

As always, if you have questions about the suitability of any Will for your needs and circumstances, seek independent legal advice.

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