Testamentary Trust Wills, Special Disability Trusts and Protective Trusts

Essentially any trust that is established in your Will is a Testamentary Trust.

Testamentary Trusts

They can take any number of forms and be drafted to suit your family needs. Common trusts established in Wills include:

  • Tax planning Testamentary Trust – This type of trust is usually established so that your beneficiary(s) can manage their inheritance in a tax effective manner. It also offers some asset protection. Contributing assets to a trust during your lifetime will often trigger stamp duty and/or capital gains tax, so a Will can be an effective tool to create a trust without triggering these liabilities. Then, ongoing, your beneficiaries will be able to allocate income between themselves and their family to take advantage of any lower tax brackets in the group.
  • Special Disability Trusts – Beneficiaries with a severe disability (as defined in the Social Security Act 1991) might be eligible to have their inheritance exempted from the Centrelink pension assets and income test. This is achieved by placing their inheritance into a Special Disability Trust. There are very strict rules and requirements as to how this trust must be structured and operate.
  • Protective Trusts – Sometimes it is necessary that a beneficiary not be directly responsible for managing their own inheritance. This may be because of addiction, bankruptcy or poor financial literacy. Trusts can be established for a person’s benefit, where the control and management of the trust is placed in the hands of another person or organisation.

Can we assist you to establish a testamentary trust in your Will?

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