In preparation and finalisation of a will, we have found that people often ask if there is any benefit in establishing a trust in a will, known as a testamentary trust.
In some ways, a testamentary trust is like a discretionary family trust, but family trusts do not form part of your estate when you pass. There are some benefits unique to a testamentary trust in a will.
Testamentary trusts allow for a protection of assets. It allows that the assets belong to the trust, not to the beneficiary which can useful in the event a beneficiary becomes bankrupt and creditors are seeking to access the assets.
Testamentary trusts allow for a minimisation of tax expenses as well. To beneficiaries of an estate under the age of 18, it allows for a significant minimisation in tax. This is significantly different to the taxation requirements of a discretionary family trust.
Testamentary trusts allows for the finances of the estate to be controlled by someone else in the event the beneficiary does not have capacity (for a number of different reasons), making decisions in the interest of the beneficiary whilst maintaining control at all times.
A testamentary trust does not take effect until the death of the person who has prepared the will and trust. Once the estate is being administered, the assets can be directed to the testamentary trust which then controls the assets.