A testamentary trust is a trust that is made in a Will, and will only come into effect once the person who has made the Will has deceased. Unlike the other types of express trusts, the trust is not established by a separate trust deed but through a Will.
A testamentary trust can only deal with the assets that will form part of your estate when you decease. This means that if you own assets not in your own name but through another vehicle, for example through a family trust, assets in the family trust will not form part of your estate thus a testamentary trust may not be necessary. Prime Lawyers will be able to assist you in determining whether this structure will be worthwhile and appropriate in your particular circumstance.
You can create multiple testamentary trusts (for example a different trust with a different trustee for each asset), one trust for a portion of your assets, or a trust to cover all of your assets.
One of the biggest advantages in utilising a testamentary trust is the taxation advantages. For example, you may leave your house (held in your personal name) to your wife in the Will however the intention of both of you is to pass on the house to your child once he attains the age of 21 and the wife will go to aged care. If the house is in your wife’s name, when it is transferred to the son, he will need to pay stamp duty and both your wife and son may be subject to capital gains tax. However, if the house is held in trust for the beneficiaries (being your wife and your son), the trustee (who can be your wife) may hold the house as trustee until she decides to give it to your son without the tax consequences.
Another popular way of utilising a testamentary trust is to direct your superannuation to be held by a trustee of a testamentary trust. You cannot direct where your superannuation will be paid to through your Will, and you will need to make the necessary death benefit nominations through your super fund. Our commercial lawyers will also be able to assist you in this. Holding your superannuation entitlements in a testamentary trust will also have significant taxation advantages for your beneficiaries.
Our commercial lawyers will assist you in deciding whether a testamentary trust is the right structure for you. If you would like to speak with one of our commercial lawyers, please contact us on (02) 9521 2222. You can also email your enquiry online now and we will contact you shortly.