Article by Manny Wood published in the Coffs Coast News Of The Area on 24 November 2023.
John and Mary have two adult children and several grandchildren. They have joint assets of $1.5 million.
Their children have almost paid-off their home mortgages and are both gainfully employed.
When they talk to their solicitor about their estate planning, their solicitor recommends that they consider making wills that establish testamentary trusts (TT Wills).
The effect of these types of wills is that upon John and Mary’s passing, their children have the option to use a testamentary trust as a vehicle for their inheritance.
John and Mary own most of their assets jointly and they wish for the whole of their assets to simply pass to each other when the first of them passes-away, without using any trusts. They appoint each other as their executors to achieve this.
Both children are appointed as joint executors upon both of their parent’s passing.
The TT Wills create a separate trust for each child. Each child can appoint themselves as the trustee of their respective trust and control the trust as they see fit. The beneficiaries of the trust include the child, their spouse and their children. The trustee can make distributions from the trust to any of the potential beneficiaries at their discretion. Minor beneficiaries who receive distributions from testamentary trusts receive the full adult tax-free threshold which creates substantial tax savings that can be made by using testamentary trusts, which should be managed under the advice of an accountant and financial advisor.
Each child can elect to transfer only a part of their inheritance into their trust and can elect not to use the trust structure at all.
TT Wills can also provide benefits in terms of asset protection. If a child’s inheritance is held in a trust and their relationship with their spouse breaks-down, the funds may not be considered to form part of their assets in family law proceedings, although the funds can be taken into consideration as a financial resource.
Email Manny Wood, Principal Solicitor and Accredited Specialist in Wills and Estates at TB Law at manny@tblaw.net.au or call him on (02) 66 487 487. This column is only accurate at today’s date and is not legal advice.
