by Kirsten Lesina

Whilst most people opt for a “simple” will, wills which include Testamentary Trusts are a powerful estate planning tool which can offer numerous advantages to your family after your passing, particularly if you have minor children.

The key benefits of a Testamentary Trust can include:

  • protection against inherited assets being divided during a relationship breakdown;
  • protection for immature beneficiaries;
  • tax advantages and flexibility; and
  • bankruptcy protection.

The following case study highlights some of the advantages of Testamentary Trusts.

Case Study

Leslie and Ben are a married couple with three children under 18, Westley, Stephen and Sonia. Leslie is the main income earner and Ben works part-time while caring for the children. Leslie’s will includes a Testamentary Trust which names Ben, Westley, Stephen and Sonia as the primary beneficiaries.

Leslie sadly passes away while her children are minors. Leslie’s Testamentary Trust has assets of $800,000, which mainly consists of Leslie’s superannuation death benefit.

As the family is now without the main income earner, Ben is left with the responsibility of raising three children with limited income. Luckily, Ben can distribute $22,000 per child each year tax free, for a total of $66,000 a year tax free, from the Testamentary Trust to pay for the children’s living and education expenses.

This means that rather than paying the children’s expenses with his own income which has been taxed, he can use tax free income. This arrangement can also continue to the next generation so that expenses for any children Westley, Stephen or Sonia may have can also be paid with tax free income.

Three years after Leslie’s passing, Ben re-partners with Shauna. Ben and Shauna have another child and then separate. As all of Leslie’s assets form part of the Testamentary Trust, they are excluded from the property pool during Ben and Shauna’s separation, unless Shauna can prove that they should be included, which preserves Leslie’s hard-earned assets for her own children.

How we can help

Our Estate Planning solicitors can help you determine whether a Testamentary Trust would be beneficial for you and your family. We offer reasonably priced fixed-fee Testamentary Trusts which are tailored to your individual needs. Contact us on 4051 5388 to book an appointment today.