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If you need advice and support on a legal matter that involves either the drafting of a testamentary trust, At Home Legal is ready to assist.

The Role of A Trustee in a Testamentary Trust

A testamentary trust is administered by a trustee, who is nominated in the Will document. The trustee is responsible for the investment and distribution of assets of the trust in the best interests of the beneficiary. The trustee must look after these assets until the trust comes to an end.

A trustee may distribute parts of the capital and/or income to beneficiary or beneficiaries at their discretion in any one year. A testamentary trust provides the trustee with the flexibility to control when and how much individual beneficiaries receive their inheritance.

All assets (money and investments) held within a trust are referred to as the trust fund. The trust fund may produce income through interest or dividends. Capital assets in the trust fund may grow in value over time, resulting in capital gains which can be deferred by being held by the trustee of the trust and not distributed to the beneficiaries.

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How a Testamentary Trust Can Aid Your Interests

A Trustee can direct that income generated by the trust is to be divided among beneficiaries, in a tax effective manner and help to minimise applicable income tax. Asset protection from creditors is provided by the structure of the testamentary trust, as the assets are owned by the trustee and not by the beneficiaries. For vulnerable beneficiaries, an independent trustee may be appointed to help manage their inheritances.

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Some of the common reasons for individuals to create testamentary trusts include:

  • Having minors under the age of 18
  • Wanting to provide for an inheritance for grandchildren
  • Wanting to delay to a greater age when beneficiaries obtain the their inheritance
  • Wanting to stagger the inheritance to the beneficiaries so it is not wasted all at once
  • Provide a tax effective vehicle for the transfer of wealth to the next generation
  • Circumstances that involve beneficiaries with diminished mental or financial capacity
  • The consideration that beneficiaries may not use their inheritance wisely
  • Not wanting family assets to be split as part of a divorce settlement
  • Not wanting family assets to be involved in bankruptcy or creditor proceedings

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