When you DON'T need a Testamentary Trust

Written by Gabriella Ferraro

There are many benefits to Testamentary Trusts (TTs) but they are not a suitable asset protection tool for everyone.

Here are our 5 examples on why a TT may not be right for you.

1. when the assets in your estate that are passing to beneficiary are not significant enough to justify a testamentary trust. If the assets of the estate are not significant, the administrative costs of a TT will not justify the trust structure.

2. if there are no minor beneficiaries. One of the great benefits of a TT is that it allows income of up to approximately $20,000.00 to pass tax free to minors. Without any benefits being paid to minors, your estate is unable to utilise a significant tax benefit of a TT.

However, it is important to not be shortsighted when estate planning, you may not have grandchildren on the day you write your Will but perhaps, you would like future grandchildren to benefit from your estate.

3. where there is no need for asset protection. If your beneficiaries are not involved in business, high risk management or the threat of family law proceedings are not a threat, there may be no benefit in the asset protection offered by a TT.

4. no need for control from the beyond the grave. Often a testator will feel the need to monitor the spending of a beneficiary, where that is due to excessive spending habits or drug use and a TT can be a really good tool to protect the estate in these instances. Where beneficiaries do not have a need to be protected, there may be no need for a TT.

5. if beneficiaries all live overseas. In the circumstances where your beneficiaries are living overseas, your beneficiaries may find it worthwhile to have their benefit paid directly to them after your passing.

Generally speaking, it is always worthwhile considering the benefits of a Testamentary Trust and whether they are right for you but often, simple, nuclear families with small estates can typically benefit from a simple Will.

The information provided in this article is general advice only. Given that each situation is unique, we recommend that you contact our office if you are considering preparing your Will. You can contact a member of our estates team on (03) 9311 8911.