Testamentary Trusts -
Secure Your Legacy with Expert Planning
What is a Testamentary Trust?
We can create a testamentary trust through your will and it will take effect after your death. As a result, you gain better control over how your assets are managed and distributed among your beneficiaries. A trustee then manages the trust according to your instructions in the will.
In short, a testamentary trust provides financial security and flexibility for beneficiaries. In many cases, it also offer tax benefits and protect assets from creditors, legal action, and relationship breakdowns.
How to Set Up a Testamentary Trust with Eleven Legal
Step 1
Book a consultation with one of our estate planning lawyers.
Step 2
Discuss your family and financial situation, and define your objectives.
Step 3
Our expert lawyers will draft the terms of your testamentary trust and get you to review it with us.
Step 4
Finalise your will and set up the trust.
Step 5
Ensure your beneficiaries are informed and prepared.
How a Testamentary Trust Works
We would establish your testamentary trust through the terms of your will. Upon your death, the trustee manages and distributes the assets according to the instructions outlined in the will. In effect, testamentary trusts are a powerful estate planning tool – here are some reasons why:
Testamentary trusts can save your beneficiaries tax after your death
Testamentary trusts can offer tax flexibility. Each year, the income earned from the trust assets can be distributed to the beneficiaries of the trust in a tax-effective way. Accordingly, each year the trustee can determine which beneficiaries should receive the income of the trust.
Appointment of Trustee
In your will, you nominate the person or people who will manage the trusts created by your will. This person is the trustee, and is the legal holder of the assets and is responsible for the management of the trust. If your children are old enough, you can appoint them to manage their own trust, otherwise you can appoint another person to manage the trust for them.
Having a trustee can also add an additional layer of protection from your beneficiaries being sued.
Activation of Trust upon your death
The trust is not established or “settled” until after your death, at which point your trustee gains control of the trust assets. As such, it is only at this point that the trust actually begins, so there are no compliance obligations prior to this point. However, your will MUST set out the terms of the trust, and it is too late after you die for the trust to be reverse engineered.
Management and Distribution
The trustee will manage and distribute assets in accordance with the terms set out in the will. Generally, the expenses in meeting compliance requirements should be outweighed by the tax savings to your beneficiaries.
Types of Testamentary Trusts
- The trustee has full discretion over how and when the funds are distributed.
- Allows flexibility in response to changing financial and personal circumstances.
- Designed for beneficiaries who are minors or have special needs.
- Ensures that the funds are used solely for the beneficiary’s welfare.
Benefits of a Testamentary Trust
Flexibility in Asset Disribubtion
It gives you the ability to control how and when your beneficiaries receive their inheritance. This is particularly useful for beneficiaries who are minors, financially inexperienced, or vulnerable.
- Allows staged distribution (e.g. when beneficiaries reach certain ages or life milestones.
- Protects assets from being mismanaged.
- Enables ongoing financial support for dependents.
Tax Efficiency
Accordingly, it helps your distribute assets in a tax-efficient way, reducing the tax your beneficiaries pay.
- Splitting trust income among multiple beneficiaries lowers tax liability.
- Beneficiaries under 18 are taxed at adult rates, not minor rates.
- Careful planning reduces capital gains tax on inherited assets.
Protection from Creditors and Legal Claims
A testamentary trust can additionally protect your beneficiaries’ inheritance from legal claims, creditors, and family disputes.
- Assets held in a trust are not considered personal property of the beneficiaries in the same way as other assets.
- Protection in cases of bankruptcy, divorce, or other financial challenges.
- Can shield from potential legal claims or disputes among family members.
Protecting Vulnerable Beneficiaries
Testamentary trusts are especially useful in the instance that beneficiaries are minors, have disabilities, or may be vulnerable to financial exploitation.
- The trustee can manage the funds on behalf of the beneficiary.
- Ensures ongoing financial security.
- Provides peace of mind for parents and guardians.
Why Choose Eleven Legal for Testamentary Trusts?
At Eleven Legal, we help clients secure their legacy with tailored solutions. In summary, our experienced estate planning lawyers work closely with you to protect your assets and provide for your beneficiaries.
Our Expertise Includes
- Drafting and reviewing testamentary trusts
- Assisting with the appointment of trustees
- Managing complex family and financial arrangements
Common Mistakes to Avoid with Testamentary Trusts
- Not seeking professional legal advice when setting up the trust.
- Choosing an unreliable or inexperienced trustee.
- Failing to update the terms of the trust as your personal circumstances change.
- Overcomplicating the terms of the trust, later leading to confusion for the trustee.
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