Protect your Estate – Estate Planning and Testamentary Trust Wills.
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What is a Discretionary Family Trust ?
A Discretionary Family Trust (also known as a Testamentary Trust) is a Trust which is created upon the death of the testator, and which has been specified in their Will.
The Trust is a legal entity which can own assets and invest money, however it does not pay tax in its own right. It acts as a funnel that passes the income down to its beneficiaries, who pay the tax.
It is called a Discretionary Trust because the trustees have discretion as to how much income goes to each beneficiary. The assets of the trust, while able to be controlled by a beneficiary, do not form part of that beneficiary’s estate.
If you are survived by a spouse
Passing your assets into a Discretionary Testamentary Trust will enable your spouse to “stream” income from the investments in the Trust to assist the broader family members in a tax effective way.
A child beneficiary.
A child beneficiary’s share of your Estate may be used towards the child’s maintenance, education and advancement in life. The income from the Trust used in this way will be taxed at normal rates.
Survived by an adult beneficiary
If you are survived by an adult beneficiary a Testamentary Trust will enable them to leave their share of the Estate within a Trust, the income from which can be “streamed” to other beneficiaries.
Protect inheritance if there is a marrage break-up
An inheritance held within a Testamentary Trust is unlikely to be the subject of a Family Court order in the case of a marriage break-up.
Protect inheritance if there is a bankruptcy
A Testamentary Trust which is under the de-facto control of your child may not be able to be attacked in the event of bankruptcy.