Protecting your assets and minimising tax through a testamentary trust could save your loved ones heartache as well as money.
A testamentary trust is a trust created by a will. But instead of the assets of a deceased estate being distributed to the beneficiaries, assets are retained in a trust for the benefit of the beneficiaries.
The control of the testamentary trust lies with the trustee of the testamentary trust as set out in the will. The trustee can be any person, group of people or company. Often the surviving spouse is the trustee until death and then control is passed to the children.
Testamentary trusts may contain all of the assets of a deceased estate, or only some. Any specific assets can be distributed to any beneficiary, rather than being passed to the testamentary trust. Usually, the Will is structured so that the personal belongings and household effects of the deceased are passed to the surviving spouse or children, as there is no benefit in transferring them to the testamentary trust.
Often we leave the careful drafting of our wills until we believe every other issue has been dealt with. This is not a recommended strategy. It is more important to have a current will to deal with the situation as it is now and to provide for the future (such as the use of a testamentary trust) – if need be, your will can always be amended at a later time.