Testamentary trusts are written into comprehensive Wills and can only be used by a beneficiary after the Will owner dies. In every Will from Will Wizard, there is 12-page segment dedicated to providing testamentary trusts to beneficiaries. A testamentary trust is not something a Will owner needs to ‘create’. They are already written into the comprehensive Will, waiting to be established by your executor for your beneficiaries after your death. All a Will owner has to do is purchase, and sign, a comprehensive Will. After the Will owner dies, their comprehensive Will becomes a beneficiary’s testamentary trust document. The document then sits in a drawer, or with their accountant, until it is needed by the beneficiary at tax time. A beneficiary names their trust (i.e. John Smith Holdings) and receives a tax file number for their trust. Beneficiaries still manage and invest their inheritance as they normally would, but under law, the inheritance is not owned in their own name. Instead, under law, it is 'held on trust' for the benefit of each beneficiary. By holding their inheritance in a testamentary trust, beneficiaries are able to minimise tax and protect inheritances from third-party threats such as during a divorce or bankruptcy. The annual accounting costs of a testamentary trust are usually only $300 - $500. Considering the tax benefits & protections, it is a small price to pay. IMPORTANT: If your Wills do not include the testamentary trust provisions & terms, your beneficiaries cannot use testamentary trusts after you die.

Yes. There is no sensible argument against relying on a Will that gives your beneficiaries the option to utilise testamentary trusts given the tax minimisation opportunities and asset protection benefits testamentary trusts provide.

No, they are not expensive. Especially when the tax minimisation opportunities and asset protection benefits of trusts are considered. Establishment costs The establishment costs charged by an accountant and/or solicitor are minimial and should form part of the normal estate administration costs handled by the executor on behalf of the estate. An estimate cost for establishment would be approximately $1,000 to $2,000 depending on the rates charged by the accountant and/or solicitor. Managment costs Each year a beneficiary must submit a simple tax return for their testamentary trust(s). The accounting costs should only range from a few hundred dollars to around a thousand dollars depending on complexity and the rates charged by the accountant. Should loans be made by the trust, minutes will need to be submitted also which may increase the management costs slightly.

Testamentary trusts help beneficiaries protect inherited assets during events like a divorce, and from financial problems like bankruptcy. Testamentary trusts also help beneficiaries to minimise their tax obligations long-term. Testamentary trusts can last for 80 years, with the benefits passing from one generation to the next. Let’s look at the four main advantages in more detail. Testamentary Trust Advantage #1 Testamentary trusts help protect inheritances from family law claims Relationships last 10 years on average, so it is statistically probable that a beneficiary will go through a divorce, or de facto break-up after you pass away. How do testamentary trusts help? With the inheritance held by a testamentary trust, inherited assets are isolated from the beneficiary’s personal assets. This means the inheritance would not form part of the disputing couple’s combined assets that are up for grabs in Family Court proceedings. Testamentary Trust Advantage #2 Testamentary trusts protect inheritances from bankruptcy or owing money to creditors, like a bank. How? Assets held by a testamentary trust are not personally owned by the beneficiary, and therefore do not form part of the beneficiary’s personal assets. Therefore, a person or company claiming against the beneficiary that is having financial problems cannot obtain the inheritance held by the testamentary trust. Testamentary Trust Advantage #3 Testamentary trusts give beneficiaries the option to reduce their personal income tax. How? Beneficiaries distribute income from the investment of their inheritance to family members on low tax rates. A beneficiary can distribute up to $18,200 of income from their testamentary trust, tax-free, to pay for a family member’s education and living expenses. For an $800,000 estate, earning a modest 5% return, this equates to $40,000 income per year. With this income distributed to multiple children - over ten years this would mean $400,000 for your beneficiary's family rather than the ATO. Testamentary Trust Advantage #4 Testamentary trusts allow beneficiaries to reduce capital gains tax. How? Beneficiaries are permitted to distribute capital gains from their testamentary trust to family members on a low or nil income. This way the capital gains tax liability from inherited wealth can be significantly reduced each year. Also, capital gains tax is not triggered when an asset belonging to you passes via your Will, to a testamentary trust.

No. Forcing beneficiaries to share a single trust can easily lead to disputes. However, if beneficaireis are provided with the appropriate professional advice in favour of sharing a single trust, Wills from Will Wizard can accomodate this without issue.

The trustee is the person appointed by a beneficiary to manage and control their testamentary trust. Most beneficiaries choose to appoint themselves as the trustee. If the beneficiary is over your nominated controlling age, most beneficiaries choose to appoint themselves as the trustee, unless they choose to nominate other persons to act as trustee for them, or they could choose to nominate a private company or corporate trustee. If a beneficiary is under your nominated controlling age, your executor or their legal representative will act as trustee until the beneficiary reaches your controlling age. Young beneficiaries still have access to funds for their welfare, well-being, education, housing, family & medical needs. No matter who acts as trustee, the trust assets and trust income are for the benefit of the beneficiary only unless the beneficiary gives permission for someone else to benefit - like their children. In Wills from Will Wizard, there are a set of defined circumstances where a beneficiary is not permitted to be the trustee of their own trust. When inherited wealth is at high risk, your beneficiary can be temporarily replaced as trustee by your executor, or the executor's legal representative. The trust assets and income are still for the benefit of the beneficiary only. This is a common and effective legal strategy that helps to further protect the inheritance during a beneficiary's divorce, or during a beneficiary's financial problems or bankruptcy. This strategy could also be used if the beneficiary develops a serious addiction issue or a mental health concern. Beneficiaries at risk still have access to funds for their welfare, well-being, education, housing, family & medical needs.

Yes. Will Wizard testamentary trusts are extremely practical. - They are simple and inexpensive to run; - They can adapt to suit your beneficiaries’ changing needs and tax status; - They can be ended if the beneficiary decides to reside full-time overseas; - They can help to minimise disputes between beneficiaries.