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Testamentary Trust 

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Testamentary Trusts Multiple

What is a Testamentary Trust?

A Testamentary Trust is established in a person’s Will, and is activated after their death. It is created to hold and safeguard all or some of the assets that a person accumulates over their lifetime, for the benefit of others, known as beneficiaries.

A trustee is nominated in a Will to manage the trust assets. The trustee is responsible for distributing the assets to the beneficiaries as per the terms outlined in the Will.

A Multiple Testamentary Trust is a Will which creates multiple testamentary trusts. The document itself contains drafting notes which can be deleted when the document is finished.

testamentary trust may be created using specified assets, a designated portion of your estate or the entire remaining balance of your estate. Multiple trusts may be created by the one Will and it’s possible to have trusts with different provisions which can be tailored to the needs of your beneficiaries.

You can create multiple testamentary trusts in your Will if you want and you can give the executor of your Will the discretion to avoid the setting up of a trust with the consent of the beneficiary should circumstances warrant.

15 pages long and includes:-

CONTENTS

  •          STANDARD CLAUSES
  •          Legal and financial advice
  •          Survivorship
  •          Power to disclaim
  •          SCHEDULES
  •          SCHEDULE
  •          Provision for spouse
  •          Executors
  •          Creation of trust
  •          Disposition of estate
  •          SCHEDULE 2
  •          Children.
  •          Executors
  •          Guardians
  •          Creation of trust
  •          Disposition of estate
  •          Third generation
  •          Grandchildren  3
  •          Disposition of third generation
  •          No surviving person
  •          Equalisation of benefits
  •          SCHEDULE 3
  •          Property of the trust
  •          Trustees: definition and appointment
  •          Conflicts of interest
  •          Ineligible trustees
  •          Primary purpose
  •          Beneficiaries
  •          Powers of the primary beneficiary
  •          Transfer of powers
  •          Manner of exercise of powers
  •          Investment 8
  •          Powers of trustees
  •          Vesting and dissolution of the trust
  •          SCHEDULE 4
  •          Executors
  •          Conflicts of interest
  •          Priorities
  •          Duty to appoint
  •          Duty to seek out superannuation death benefit nominations
  •          Self-managed superannuation funds
  •          Superannuation lump sum death benefits
  •          General powers of executors and trustees
  •          Fees and commission
  •          Interpretation
  •          Definitions

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Will Signing Instructions

How to Sign your Will

  1. You must sign and date your Will in the presence of two witnesses at the same time. It is best that all three persons use the same pen as proof of the fact that they were together at the same time.
    1. Your witnesses should not be beneficiaries or potential beneficiaries under your Will. There is a presumption at law that a beneficiary who has also witnessed a Will may have used undue influence in order to obtain a gift in the Will. The law therefore invalidates gifts to beneficiaries who serve as witnesses. The same applies to spouses of beneficiaries.
    2. Subject to the above, your Will can be witnessed by anyone who is of sound mind and at least 18 years old.
  2. You should review your Will in the presence of your witnesses, then sign it on the last page and the foot of every page, using your normal signature. Take care not to miss any pages. Then write the date on your Will.
    1. Both witnesses must see you sign your Will. They also need to see each other sign as witnesses. This requires you and your witnesses to be present at the same time.
    2. Your witnesses should view every page so they can confirm, if asked, that there were no amendments when you signed your Will. They do not, however, need to read the Will or know what it says.
  3. After you have signed and dated your Will the first witness must then sign at the bottom of each page and at the end of the Will immediately below the attestation clause in the space provided. The second witness then follows this same procedure. The witnesses should include their full names, occupations and addresses so they can be located in the future if it becomes necessary for them to verify that you signed the Will. You should confirm that each witness has signed where required.  Do this while they are all still in the same room. Finally, make sure all pages of your Will are stapled together.

 

Storing Your Will

Keep your Will in a safe place and tell your executors where you have put the original.  You may also consider giving your executors a copy of the Will. There is no requirement to register your will or do anything else with it.

 

Testamentary Trusts

 

A testamentary trust is a trust created by will. It is usually a discretionary trust.

The testator of a will creates a trust and directs the trustee to hold property in accordance with the terms of the testamentary trust for specified beneficiaries. At some future time the trustee distributes the property to the beneficiaries of that trust.

Testamentary trusts are often recommended by financial planners and accountants. They are very useful for parents of small children (minor beneficiaries). Testamentary trusts tend to be driven more by the needs of the beneficiaries than by tax considerations. If a testamentary trust fails, the property will usually be held on resulting trusts for the testator’s residuary estate.

A testamentary trust has two main advantages for a will maker and the nominated beneficiaries asset protection; and income splitting.

Asset protection

Many clients are concerned about protecting their assets. They want to make sure that the assets remain within the family and are used to benefit family members.

In particular, clients are concerned about:

(a)  their beneficiaries becoming bankrupt, especially those that are involved in high risk businesses;
(b)  their beneficiaries becoming divorced and their assets being split in the divorce;
(c)  spendthrift or minor children;
(d)  ensuring that the surviving spouse will pass on their assets to their children upon that person’s death; or
(e)  looking after children and disabled relatives.

The advantage of a testamentary trust is that the assets are owned by the trustee, and the benefit of the income and capital of the trust passes to the beneficiaries. This separation of control and benefit allows testamentary trusts to protect assets from any legal action involving the beneficiaries and/or misuse of those assets. The terms of the testamentary trust are set out in the will.

Taxation benefits

Testamentary trusts can benefit where people have children under 18 and a sizeable estate. The estate may be sizeable as the result of the sale of a business, from amounts held in a superannuation fund, or from the proceeds expected to be received from an insurance policy.

Children under 18 receiving income from a testamentary trust are taxed as though they are adults. Distribution of income to minors is taxed in the hands of minors at normal marginal rates. They therefore get the benefit of the tax-free threshold and low rates of tax. All family members may utilise their income tax free thresholds. Any income, capital gains and franked dividends can be distributed among all the family beneficiaries each year in the most tax-efficient way. The tax concessions also apply to any income and capital gains derived from assets acquired from the reinvestment of moneys received from the original inherited assets.

4  Precedents Available

  1. Letter advising testamentary trust
  2. Letter enclosing will and signing instructions
  3. Will creating one testamentary trust
  4. Will creating multiple testamentary trusts
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