Testamentary Trusts: Protecting Your Legacy and Your Loved Ones

What Is a Testamentary Trust?

A testamentary trust is a type of trust that is established under a Will and comes into effect only after the will-maker’s death. Unlike a standard Will, which distributes assets directly to beneficiaries, a testamentary trust holds those assets in trust for the benefit of the beneficiaries. A trustee (appointed in the Will) manages the assets according to the terms set out by the deceased. The beneficiary usually retains control of the assets in the trust but the assets themselves are owned by a trustee (usually a company set up for that exact purpose).

A will with a testamentary trust is a powerful estate planning tool that offers flexibility, protection, and potential tax advantages to your beneficiaries.

Have you considered a Testamentary Trust?

1. Asset Protection

Testamentary trusts can shield assets from potential creditors or legal proceedings involving beneficiaries. This can be especially helpful if your beneficiaries:

• Are going through a divorce or separation, (or may do so in the future)

• Face financial instability or bankruptcy, or

• Are at a high-risk of being sued.

By holding assets in a trust rather than transferring them outright, the trust structure adds a layer of protection.

2. Tax Minimisation

Testamentary trusts provide significant tax benefits, particularly for beneficiaries with children. Income earned by the trust can be distributed in ways that can dramatically reduce the overall tax burden.

3. Flexibility in Distribution

Unlike a fixed inheritance, a testamentary trust allows the trustee to make flexible decisions about how and when to distribute income and capital. This means:

• Funds can be preserved for major life events like education, housing, or starting a business.

• Vulnerable beneficiaries, such as those with disabilities or addiction issues, can have their needs met in a managed, sustainable way.

4. Succession Planning

If your estate includes a business, family trust, or significant investment portfolio, a testamentary trust can help manage the transition smoothly and reduce disputes. It allows you to structure how control and benefits pass down through generations.

Should I have a Testamentary Trust?

A testamentary trust may be right for you if:

• You want to ensure that your children or grandchildren are provided for responsibly,

• You have concerns about your beneficiaries’ ability to manage money,

• You are looking to minimise tax for your estate or family,

• You have a blended family or complex family situation, or

• You want to protect your legacy against potential claims.

How We Can Help

We are experts in estate planning. We can help you by:

• Creating a Will that includes a testamentary trust,

• Advise on the best trustee structures,

• Help executors and trustees administer the trust, and

• Review existing Wills and estate plans to ensure optimal outcomes.

We ensure your testamentary trustis structured in a way that truly protects your loved ones and your wishes. If you are unsure about whether you need one, talk to us.