What is a Testamentary Trust?
The main benefits of Testamentary Trusts are their ability to protect assets and to reduce tax paid by beneficiaries from income earned from the inheritance and created by a Will. It helps provide a greater level of control over the assets of the Will.
A Testamentary Trust does not come into effect until after the death of the person making the Will. At this time, the specified deceased estate property is transferred to a trustee, who holds the assets on trust for the benefit of the beneficiaries.
If you are responsible for administering a Testamentary Trust, you should consider seeking expert legal advice, from a lawyer that deals with and has great experience in the area of Testamentary Trusts.
Get In Touch with Heckenberg Lawyers if you’re seeking expert legal advice on establishing a Testamentary Trust.
Trusts are not just for the wealthy. Trusts, are a well accepted and expert way to deal with a number of issues that can arise in any family, rich or poor.
Trusts & Young Children
Setting up a Trust in your Will is one way to ensure that any children you care for under the age of 18 years old, will be looked after financially after you are gone. This can mean setting money aside in the Trust for their future education needs, as well as their everyday needs with the balance of any moneys in the Trust to be given to them at an age you consider appropriate.
Vulnerable Family Members
A Trust is also the ideal way to manage and ensure the financial security of any vulnerable family members including any members of your family who may be suffering from a mental or physical disability.
A Trust may have some taxation benefits for the beneficiaries of the Trust which needs to be balanced against any impact the income from the Trust may have on pensions or other government benefits.
Choosing the Trustee
By setting up a Trust in your Will, you can choose who you would like to appoint as the Trustee of the Trust. After deciding to set up a Trust, choosing the Trustee is the most important decision you can make. This is because it is the Trustee who, will be in charge of administering the Trust and making the day to day decisions on when and how to distribute the income in the Trust. You need to think very carefully about the person you would like to appoint as your Trustee and you need to talk to them about your decision to make sure they accept the responsibility.
One of the main attractions of a Living Trust is that it does not go through Probate. This has many advantages for beneficiaries under the Trust including a limitation on family provision claims against your Estate.
A Living Trust, also called an ‘inter vivos trust’, is a trust set up during your lifetime. All your assets are transferred to the Living Trust. You still retain control of the assets in the Trust by naming your self as the Trustee. On your death the Trust continues to operate with the appointment of a new Trustee.
If you believe that setting up a Living Trust would suit your particular situation you need to seek expert legal advice from a Wills & Estates lawyer on the drafting of the Trust Deed to ensure the trust is set up in accordance with legal requirements. In addition, you will need advice on any taxation implications that may arise on the initial transfer of your assets to the Living Trust. This includes advice on any stamp duty or capital gains tax that may be payable.
When deciding to set up a Living Trust it may be a matter of weighing up the taxation implications in the transfer of your property to the Trust, against the possibility that your Estate may be subject to a family provision claim. In New South Wales the class of persons eligible to make a family provision claim is very wide and includes ex partners as well as their children (if they have resided with you) and any person who has been partly or wholly financial dependent on you during your lifetime.
Setting up a Living Trust for client’s falls under the general heading of Estate Planning. Estate Planning is an important facet of the legal work performed by Heckenberg Lawyers. In Estate Planning we use our extensive experience in Wills and Estates to plan your Estate for a wide number of reasons including the minimisation of taxation and the protection of your assets from a family provision claim after your death.
Regardless of whether your Estate will be large or small all our client’s benefit from expert legal advice on planning their Estate. This advice provides peace of mind to our client’s whilst they are alive and financial security to their intended beneficiaries after they are gone.
For parents who have children with disabilities, making a Will involves additional consideration of their needs once you are no longer there to support them. There are different options to consider depending on the requirements of your Will.
Parents have the ability to ensure their wishes for their disabled children are adhered to in their later life.
The most common way for this to be done is to create a Testamentary Trust in your Will. A Testamentary Trust will allow you to elect a Trustee to look after your childrens inheritance to ensure that it is used for their benefit and in accordance with your wishes.
Depending on the disability that your child has, you might consider setting up a Special Disability Trust for your child in your Will.
A Special Disability Trust is a Trust made in accordance with the Social Security Act in which you can make provision for the reasonable care and accommodation needs of your child.
The advantage of a Special Disability Trust is that it will allow your child to continue to receive any government pension such as the Disability Pension.
A Disability Trust can be set up in your Will or you can set one up now for the benefit of your disabled child.
It is extremely important that the Special Disability Trust is set up in accordance with the Social Security legislation otherwise it will not receive the benefits under the legislation. This includes using the compulsory clauses that are set out in the Model Trust Deed for Special Disability Trusts. A failure to use the compulsory clauses will mean that the Trust will not qualify as a Special Disability Trust.
Special Disability Trusts are only available to disabled people who suffer from a severe disability. A severe disability means:
- If a person is 16 years or older they have a level of impairment that would qualify them for Disability Support Pension and who has a disability that would allow any carer to qualify for a Carer Payment or Carer Allowance.
- If a person is 16 years or older they are living in a Government funded institution, hostel or a group home for people with disabilities and they are not able due to their disability or there is no likelihood that they will work for more than 7 hours week.
- If a person is under 16 years of age they have a severe disability or a severe medical condition and their carer has received the required rating in the Disability Care Load Assessment.
- If a person is under 16 years of age their treating doctor has certified in writing that because of the child’s disability or condition they will need personal care for more than six months and the child care is required to be provided by certain people.
If you would like to set up a Special Disability Trust for your disabled child the next step is to seek expert legal advice to ensure that the Trust is in accordance with the Social Security legislation.
In the event that your child does not meet the eligibility for a Special Disability Trust it is still possible to set up a Testamentary Trust in your Will to ensure that your wishes for them are adhered to later in their life.
I am about to make a Will and wanted to know if it would be a good idea to include Trust Funds for my grandchildren?
When I die, would my children be able to contest this Will? I intend not to provide for them as they are all settled with their own business and feel that my Grandchildren would make better use of the assets.
Trust Funds in Will’s are commonly used when money or property is being left to children under the age of 18 years of age or to someone who does not have the physical or mental capacity to look after themselves financially.
If you would like to create a Trust Fund for your grandchildren in your Will, there are two types of trust funds that you can create. The first one is where the money or property left to your grandchildren is managed for them until they reach a certain age. The second one is where the money or property is managed for your grandchildren for the entirety of their life, based on their financial needs throughout their life.
To decide what sort of Trust Fund would be appropriate and how to minimise any taxation on the Trust, you need to speak to a lawyer with expert experience in Wills and Estate Planning.
Your children would be able to challenge your Will after you die, as they are eligible people under the Succession Act.
However, to be successful in the challenge, they would need to show the Court that you have not made adequate provision for their proper maintenance, education or advancement in life.
When considering whether adequate provision has been made the Court will look at the following factors:
- The nature and duration of your relationship with your children.
- The nature and extent of your Estate and any liabilities of the Estate.
- The financial resources (including earning capacity) and financial needs of your children.
- Any physical, intellectual or mental disability of any of your children.
- The age of your children.
- Any contribution (financial or otherwise) by your children to the acquisition, conservation or improvement of your Estate or to your welfare.
- Any provision you have made to your children during your lifetime.
- Your testamentary intentions which can include evidence of statements made by you on why you have decided to leave all of your Estate to your grandchildren.
- Whether any of your children were being partly, or wholly maintained by you.
- Whether any other person is liable to support your children.
- The character and conduct of your children before and after your death.
To minimise the risk of your Will being successfully challenged, you need to have it drafted by an expert Wills and Estates Lawyer who can minimise the risk of the Will being successfully challenged by your children.