How to protect your well-earned nest egg for the benefit or your family

Standard or “basic” Wills give no protection against the next generation squandering their inheritance, having it swallowed-up by creditors or even in a divorce settlement.

By including a Testamentary Trust in your Will your nest-egg can be protected against future creditors, bankruptcies, divorce and spendthrifts and can also provide great taxation benefits.

At Argent Law we specialise in this area of the law, and we can include a Testamentary Trust provision in your Will which can give your beneficiaries protection against any of these future issues.

Under a Testamentary Trust the beneficiary’s share of your estate is quarantined and put into a Trust which can be managed by the beneficiary. The beneficiary can use the funds as he or she sees fit, but should any risky situation arise, the funds can be returned to the Trust and is protected. Put simply, it is like both having your cake and eating it.

The implementation of a testamentary trust is a very practical solution in situations where a beneficiary has a tendency to spend money quickly or unwisely, or if beneficiary has a disability or is vulnerable, the Will-maker can choose to nominate a third party to control or administer the Trust in accordance with the Will-maker’s wishes.

We can prepare a Testamentary Trust Will for you for as little as $900 for one person or $1,200 for a couple.

Do you want your Will to provide an education to your children or grandchildren?

You can achieve this, and more, by including a Testamentary Trust in your Will.

With a Testamentary Trust in your will, children under the age of 18 years who receive income from a testamentary trust are taxed on that income as an adult and therefore, together with the low income tax offset, each child can receive up to $20,542 of income from a Testamentary Trust without income tax being payable.

Without a Testamentary Trust, minor beneficiaries have a tax free threshold of only $416 and thereafter the highest marginal rate applies to the minor’s income.

The below table sets out the tax savings a Testamentary Trust would receive in the following scenario:

The Testamentary Trust has 3 beneficiaries who are under the age of 18 years

The Trust earns an income of $60,000 per annum

The income is distributed to the 3 minor beneficiaries

No testamentary trust

Income distributed $60,000 Tax payable: $28,200

Testamentary trust

Income distributed as follows: (Total $60,000) Tax payable

Child 1 $20,000 $0

Child 2 $20,000 $0

Child 3 $20,000 $0

Tax saving per year= $28,200

As you can see, the Trust receives $28,200 more to distribute, that would be distributed under a basic Will structure. This is a highly practical solution if you are looking to cover the cost of a child’s education.

Do you want your grandchildren to benefit from your estate without having to bypass your children?

People are increasingly faced with the dilemma of whether to leave their inheritance to their children or their grandchildren. As life expectancy increase it is becoming more likely that your grandchildren rather than your children will have the greater need.

Dividing up your estate to encompass both children and grandchildren can have to effect of fragmenting your estate which may not achieve your desired outcome.

On the other hand, if you leave your estate to your grandchildren and bypass your children, this has potential to cause an unintended rift in the family.

The practical solution here is to include a Testamentary Trust in your Will whereby each child’s share can be quarantined and put into a Trust for each child in which the grandchildren are included as beneficiaries.

In this case both the children and grandchildren are catered for and on the passing of the parent the control of the Trust would revert to the grandchildren.

If you wish to know more or want to set up a testamentary trust in your will, contact Argent Law on 03 9571 7444 or email Darby Nunan at darby@argentlaw.com.au.

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