What Is A Testamentary Trust Will And How Can You Benefit From It?

Are you curious about testamentary trusts? Do you want to know if you can take advantage of a testamentary trust Will? Then you have reached the correct place!

People typically incorporate testamentary trust into their Will to come into action after their death. It allows the Will maker to transfer their assets to a trust instead of instantly leaving them to the beneficiary. The primary advantages of a testamentary trust are tax savings and asset protection. However, that’s not all! Testamentary trusts have many more benefits you may not be aware of.

So, read on to find them out!

What Is A Testamentary Trust Will and How Does It Benefit You?

A trust is a responsibility of an individual to safely keep a property for the beneficiaries. Will-makers establish testamentary trust as a part of their Will. It comes into effect once the Will makes has passed away. If a Will has testamentary provisions, the beneficiaries can have the option to take their share in their own right or in a trust. It provides a lot of flexibility to the beneficiaries.

The Best Advantages Of Having Testamentary Trust In A Will

1. Protection From Potential Bankruptcy: Setting up a testamentary trust in your Will means protecting the share of your beneficiary from negligence, damages and bankruptcy. It is crucial if your beneficiary operates their own business.

2. Protection Relationship Breakdown: Relationship breakdowns can significantly change the dynamics and effects of a Will. When you protect your assets through a testamentary trust Will, you don’t label it as the “beneficiary’s asset”. Your beneficiary can treat it as their financial resource. However, you can ensure they are not the sole controller of the trust.

3.Tax Advantages: Trust allows you to distribute your income to your beneficiaries at lower tax rates. There are some excellent advantages for beneficiaries under the age of 18. The trust can offer the underage inheritor up to $18,200.00 without taxes.

4. Protection For Minor and Disabled Beneficiaries: Minor or disabled beneficiaries may find it demanding to manage their inheritance. In this case, having trust can be incredibly helpful. You can appoint a trustee to control their distribution of funds and reduce the risks of misuse.

What Are The Operations Of The Trust After The Will-Maker Dies?

So, how does the testamentary trust work? When an individual passes away, their executor is responsible for collecting the assets of the estate and following the Will to distribute it accordingly. When the Will maker includes testamentary trust in the Will and their beneficiary wishes to take their share in the form of testamentary, the trust will first transfer the asset to the executor. The executor then transfers the acquisitions to the trustee of the testamentary trust. 

Authorities will record and document the transfer, especially if the trustee and the executor are the same people or related. Once the trustee has received the assets, they can invest them and change the investment over time. The testamentary trust operates separately from the deceased and their estate. Hence, it must have a tax file number different from the deceased’s estate.

As the trustee, you will maintain proper records of your investments, distributions, expenses and income following applicable trust and tax laws. A Testamentary trustee has the same liability as other trustees under the Trustee Act and common law.

Furthermore, if the departed person appoints several people as the initial trustee, then a trustee cannot resign unless there are two other trustees to continue. Beneficiaries who require protection can have multiple trustees. You can learn more about this from the Trustee Act in Australia.

Bottom Line

Whether a testamentary trust Will will favour you or not depends on particular circumstances. A testamentary trust can be a practical tactic in estate planning. It can help your beneficiaries save on taxes and shield the trust from unfortunate events. You should definitely consider testamentary trust if your beneficiary has potential risk issues, they are underage or if you would like to protect the assets from claims.