Maximising and protecting your estate

Including a testamentary discretionary trust in your Will can give your family more money and security when it matters most. Make a smart decision for your family. Make your Will tax effective and protective and give your family a head start at a difficult time. Creating a Testamentary Discretionary Trust Will gives your family access to the assets and money they need, while at the same time protecting those assets from outside forces.

Bankruptcy

Unfortunately, the incidence of bankruptcy in our society is on the increase. Often one spouse will guarantee the other’s business or investment venture.

To some extent we can all be at risk whether in traditional high risk occupations or not. However, if an inheritance has been provided through a Testamentary Discretionary Trust Will and appropriately administered, offers protection from attack by creditors.

Divorce

An inheritance provided through a Testamentary Discretionary Trust Will and appropriately administered is less vulnerable of a Family Court order in the case of a marriage breakup.

The inheritance may have some effect on the terms of a matrimonial property settlement but this is a far better outcome than having the assets you have left to your children or spouse being handed over to someone outside the family.

Taxation advantages

Although these features are in themselves excellent reasons to include a Testamentary Discretionary Trust in your Will, there are also enormous tax savings a Testamentary Discretionary Trust Will gives your family.

The big advantage is that children under 18 are taxed as adults on receipt from the Testimentary Discretionary Trust and the same marginal tax rates apply.

Without this special provision, trust income to children under 18 is taxed at the highest marginal rate of 45% after just the first few hundred dollars.

Let’s use an example to illustrate the advantage a Tax Effective Will has over a traditional Will:-

Say someone dies leaving a spouse and three children. The estate including life insurance and superannuation is valued at $500,000. If this was invested at 6%, it would generate an annual income of $30,000.

Example 1:

The non Testamentary Discretionary Trust style Will leaves everything to a spouse. Assuming the spose already earns an average wage of $60,000, their tax bill is approximately $11,500. With the additional investment income, the spouse's position is therefore:

Beneficiary	Income	Tax
Spouse	$60,000	$21,250
	$30,000
	$90,000

Example 2:

The person’s Testamentary Discretionary Trust Will establishes a Trust controlled by a spouse and providing for the spouse and the two children as beneficiaries. The family’s tax position could be:

Beneficiary	Income	Tax
Spouse	$60,000	$11,500
Child 1	$10,000	$600
Child 2	$10,000	$600
Child 3	$10,000	$600
Total	$30,000	$13,350

In example 2, because the husband’s Will was tax effective, the total tax bill is $7,000 less than example 1. This saving can be repeated every year for many years, providing so much more money for the family. The saving can be multiplied by the number of beneficiaries under 18.

Spendthrifts and people with disabilities

It is not uncommon for people suffering from any one of a variety of disabilities to be unable to properly manage their financial affairs. Families wish to ensure that an adequate but protected fund is set up to meet their reasonable needs. The flexibility of a Testamentary Discretionary Trust, especially if combined with a Memorandum of Wishes as to how the trust should be administered, can be an appropriate arrangement.

Never too late

Increasingly, husbands and wives are revoking their Wills and making new Testamentary

Discretionary Trust style Wills. Grandparents are also making new Testamentary Discretionary Trust style Wills providing education trusts for their grandchildren which have the added advantage of maximising the tax free income that can be applied for the benefit of the grandchild.

Conclusion

Testamentary Discretionary Trust Wills, while largely promoted as a tax saving mechanism have many other advantages. Their inherent flexibility makes them worthy for consideration in your overall estate planning strategies.

Our Service to you

We appreciate the importance of your personal affairs. Throughout our relationship you will receive specialist guidance to assist you in your decisions. Our Succession Lawyer will be responsible for preparing your

Testamentary Discretionary Trust Will and will meet you personally to discuss your wishes. You will be kept informed every step of the way.