Testamentary Trusts

In the journey of life, an inevitable destination we all face is the end of one’s life. And as we draw near to life’s conclusion, one of the most valuable gifts we can leave behind is a well-planned legacy. This is where testamentary trusts in estate planning can be an exceptional tool.

A testamentary trust is a legal entity created upon death through provisions found in a person's will.

One of the chief benefits of a testamentary trust is its ability to protect assets. By placing assets into a trust, one can safeguard them from possible future creditors of beneficiaries, including in the unfortunate circumstances of bankruptcy. This can ensure that the inheritance is not squandered, misused, or lost in legal disputes.

Moreover, testamentary trusts offer significant tax advantages. They allow income to be distributed among beneficiaries in a tax-effective manner. For instance, income distributed to minors from a testamentary trust is taxed at adult rates, rather than the punitive tax rates that apply to income received by minors from other sources.

In addition, a testamentary trust can provide for family members with special needs.

Lastly, a testamentary trust can offer flexibility. While your will can specify your wishes, circumstances can change after your passing. A well-structured testamentary trust can accommodate these changes, allowing for unanticipated future needs of your beneficiaries.

A testamentary trust can be a powerful instrument in estate planning. It provides a way to ensure that wealth accumulated over a lifetime can be transferred in the most beneficial way, offering protection, tax efficiency, and adaptability.

However, like all legal and financial strategies, it is not one-size-fits-all. The use of testamentary trusts in an estate plan requires careful consideration and should be discussed with a member of Clelands’ wills and estates team.

If you would like Clelands to attend to your will and estate planning needs, please contact our specialised team, Charlie Beresford or Loretta Cooper on 08 8177 5888 to discuss.