Frequently Asked Questions – Testamentary Trusts

What are testamentary trusts?

Commonly referred to as just ‘testamentary trusts’, wills incorporating one or more testamentary discretionary trust are an increasingly common feature of effective estate plans.

Testamentary trusts offer similar advantages to family discretionary trusts for the beneficiaries of an estate. Essentially, they allow flexibility in the ownership and control of assets.

What are some of the advantages of testamentary trusts?

Testamentary trusts offer a wide range of benefits, and can be customised to suit an individual family’s requirements.

The key benefit is that of asset protection. A conventional will gifts assets directly to beneficiaries, while a testamentary trust allows the beneficiaries the use of the assets without placing those assets at risk from family law claims, bankruptcy or other legal claims.

In addition to the asset protection benefits, testamentary trusts offer a high level of taxation flexibility, such as income streaming, access to capital gains tax concessions and special tax concessions for minors.

When should I consider using a testamentary trust?

• If you are concerned that one or more of your beneficiaries may be at risk from a family law claim, bankruptcy or other legal misadventure;
• If one or more of your beneficiaries has a physical or mental disability, is a spendthrift, has poor judgment or has an addiction;
• If one or more of your beneficiaries is a child under 18 years, or has children under 18 years themselves;
• If you have assets that you would like to remain in the family; and/or
• If you wish to include any special rules, requirements, restrictions or conditions in your will

you may benefit from an estate plan incorporating testamentary trusts.

Are there any disadvantages to testamentary trusts?

Wills incorporating testamentary trusts are generally more expensive than conventional wills.

The use of testamentary trusts will not assist in avoiding family provision applications being made against an estate (although nor will conventional estate plans).

Who should I speak to about my estate planning and testamentary trusts?

Ballantyne Law Group is well placed to assist in both conventional and complex estate planning.