The Testamentary Trust: Top 4 Benefits

Photo of a living trust and Estate PlanningTestamentary trusts, likewise known as will trusts, provides significantly more control to beneficiaries when it comes to estate planning and distribution hen compared to a common wills. Here are the main advantages of testamentary trusts:

1. Estate Planning

Unlike the standard will, a testamentary trust affords beneficiaries greater control over their assets against third party entities. As a trustee holds all the assets’ titles included in the trust, instead of the beneficiaries, this enables the testamentary trust to safeguard assets from potential bankruptcy or lawsuit.

2. Greater Flexibility

A testamentary trust offers more flexibility to suite your specific requirements. For instance, you could limit access to distributions or assets to a specific beneficiary. Likewise, since the testamentary trusts work similarly to discretionary family trusts, trustees could decide exactly which beneficiaries can receive income from the trust, considering that they’re nominated in the testamentary trust. This means that a trustee could allocate trust dividends, capital gains, and income in a more tax-efficient approach. In addition, in the event that superannuation benefits are paid directly to the estate, the trustee would have the greatest flexibility to manage them.

3. Tax Benefits on Capital Gains

Once the capital gains tax asset is passed on to the beneficiary from the executor, the law would automatically ignore capital gains that the executor made. Furthermore, there’s usually no tax when transferring cash proceeds from death payouts from superannuation or life insurance policy.

4. Tax Planning

As a trustee of a testamentary trust, you could split and distribute the trust income with tax planning issues in mind. Likewise, testamentary trust distributions to minors would receive the standard full, tax-free limit concessions, adds Rainey Collins Lawyers and other renowned family trust lawyers. This advantage is especially beneficial to beneficiaries who have kids under 18 years old since they could pay for the expenses of their children, such as school fees among others, from pre-tax trust income.

A testamentary trust could be a practical tool for efficient estate planning. They could likewise be especially advantageous for beneficiaries who have minor children, have potential bankruptcy or business risk issues, or for those looking to safeguard their assets from third party claims. Do note, however, that a testamentary trust needs a draft with the personal circumstances of the will maker in mind. With this is mind, seeking help from an experienced lawyer to discuss what you best options are is advisable.

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