Comparison of simple wills with testamentary trust wills.

1. Testamentary trusts
Should you have one in your will?
cc: thorinside - https://www.flickr.com/photos/35237096343@N01

3. This slideshow compares a
simple will with a will that has
testamentary trusts

4. Definition of testamentary trusts
• Any trust established under a
will is known as a
"testamentary trust".
• Testamentary trusts operate
like discretionary trusts with
added advantages.
cc: Pro-Zak - https://www.flickr.com/photos/28998362@N00

5. Office holders in
testamentary trusts
• Appointor
• Protector
• Trustee
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6. Appointor
• The selection of the right Appointor
is critical because the Appointor can
‘hire and fire’ the trustee.
• You can appoint your executor or
someone else as the trust
Appointor.
cc: TANAKA Juuyoh (田中十洋) - https://www.flickr.com/photos/13910409@N05

7. Protector
• The function of the Protector is to
protect the interests of the primary
beneficiary against improper actions by
the trustee.
• The Protector has a power of veto —
the power to refuse consent - over a
range of substantial actions by the
trustee.
• The beneficiary could be the protector.
cc: DonkeyHotey - https://www.flickr.com/photos/47422005@N04

8. Trustee
• The trustee holds the legal title to the
trust assets on behalf of the
beneficiaries.
• The trustee can be a relative, a friend
or a professional trustee.
cc: Pink Sherbet Photography - https://www.flickr.com/photos/40645538@N00

9. Common problems with simple wills
• Do not deal with superannuation
• Do not deal with life insurance
• Do not deal with companies
• Do not deal with trusts
• Do not have an equalisition clause
• Do not provide asset protection
• Do not minimise tax
cc: Photos by Mavis - https://www.flickr.com/photos/42941459@N00

10. Simple will - tax issues
• The gift is received absolutely.
• Any income generated by that gift will
be taxable.
• The higher the beneficiary's income is
the higher the tax payable by the
beneficiary will be on income
generated by the inheritance gift.
cc: 401(K) 2013 - https://www.flickr.com/photos/68751915@N05

11. Testamentary trust - tax
• In contrast to simple wills a trustee of a
testamentary trust can distribute trust
income not only to the primary
beneficiary.
• This can significantly minimise tax.
cc: LendingMemo - https://www.flickr.com/photos/92802060@N06

12. Simple will - no asset protection
• There is no protection for beneficiaries
who experience any of the following:
business failure, gambling debts, sued
professionally, addiction, spendthrift
tendencies.
cc: Nrbelex - https://www.flickr.com/photos/91351004@N00

13. Testamentary trust - asset protection
• Assets held in a trust are protected
from the bankruptcy of a beneficiary.
• Protection can also be afforded in cases
of a beneficiary's marriage breakdown
if that beneficiary does not have any
control over the trust.
cc: Alberto Cabello Mayero - https://www.flickr.com/photos/53477761@N08

14. Simple Will - super issues
• Intention may have been to divide the
estate equally between the
beneficiaries.
• But a dependent beneficiary receives
the super in addition to their share
under the will.
• Resulting in unequal distribution of the
estate contrary to the testator's
intentions.
cc: verbeeldingskr8 - https://www.flickr.com/photos/35429044@N04

15. Testamentary trust - super
• Has an equalisation clause.
• Such a clause having regard to both,
estate and non-estate assets.
• Achieves overall equality and
proportionality.
cc: saxarocks - https://www.flickr.com/photos/9450118@N03

16. Simple will - loans
• Unrecorded loans to beneficiaries are
likely to result in unequal distribution
of the estate.
• An equalisation clause in a
testamentary trust will account for
loans and result in an equal
distribution.
cc: LendingMemo - https://www.flickr.com/photos/92802060@N06

17. Testamentary trust
preservation age
• The key benefit of a testamentary trust
will is that upon reaching the
preservation age a beneficiary can
choose whether to take their benefits
directly or to have them held in trust
for them.
• The preservation age is chosen by the
testator.
cc: archer10 (Dennis) (54M Views) - https://www.flickr.com/photos/22490717@N02

18. Testamentary trust-
vulnerable beneficiary
• Only a testamentary trust can impose
special obligations, conditions and
restrictions upon the trustee for the
provision of long term care for a
vulnerable primary beneficiary.
• A beneficiary with a physical or mental
handicap, or an addiction to drugs or
alcohol is vulnerable.
cc: hjhipster - https://www.flickr.com/photos/61636255@N00

19. Are you interested to
• minimise the tax liability of your estate
• protect your estate from the marriage
breakdown of a beneficiary
• protect your estate from the bankruptcy
of a beneficiary
• protect your estate from disputes and
litigation
• protect the gifts to a vulnerable
beneficiary?
cc: Roo Reynolds - https://www.flickr.com/photos/85429509@N00

20. A simple Will may not provide the
protection that you require.
Call 9221 2888 or email
val@tanandtanlawyers.com if you
want to learn more about
testamentary trusts.