Estate Planning and Trusts

Given the complexities of taxation laws, family law disputes and creditor claims, and given that most of us now have two significant assets, namely, the family home and superannuation (including life insurance), often a simple Will is not enough to protect your family.

We can assist you in making a plan suitable to you and your family. This involves:

  • Identifying and understanding the nature of your assets and liabilities
  • Advising you on options available for the giving away of your assets by Will
  • Guiding you as to the impact of taxation laws on your assets and on the options you have considered for your Will
  • Structuring a plan which balances the need to protect your wealth and the imposition of taxation laws
  • Working in conjunction with your accountant and/or financial advisor to maximise the benefits for your family


  • What is a Testamentary Trust?

    In essence, a Testamentary Trust is a trust created in your Will, which only comes into existence upon your death.

  • What are the benefits of a Testamentary Trust?

    The three significant benefits of setting up a Testamentary Trust are as follows:

    • Taxation. A person under 18 who is a beneficiary of a Testamentary Trust will be treated, for income tax purposes, as a normal taxpayer. That means that a person under 18 can receive the tax-free threshold amount as provided for under the Tax Act. This is in contrast to a child under the age of 18 who is the beneficiary of a Trust created during your lifetime in which case, distributions of income to such a child under such a Trust are heavily taxed for any distribution exceeding a prescribed (and quite low) amount.

      There is also the benefit in using a Discretionary Testamentary Trust of being able to distribute income to beneficiaries of the Trust who are, during the financial year, receiving a low income, and, therefore, pay less tax as the recipient of income from the Trust. For instance, if a beneficiary is unemployed or currently out of employment (for instance, staying at home to look after the family) then a distribution of income to that beneficiary would be very tax effective.
    • Wealth Protection. If one of your intended beneficiaries had, as at the date of your death, become bankrupt or soon thereafter became bankrupt, a gift directly to that beneficiary would end up in the hands of the Official Trustee in Bankruptcy and would, therefore, be available for distribution to unpaid creditors. If the money is held in a Trust, then it is quarantined from a claim by the Official Trustee in Bankruptcy.

      On a second note on this aspect, a beneficiary who is a businessman or a professional would also appreciate being able to leave assets within a Trust rather than in their own names. This is because the assets are then protected from claims by creditors or from claims for breach of professional duty.

    • Family Law. As assets in a Trust in the nature of a Discretionary Trust are not assets of the beneficiary until the Trustee makes a determination, it certainly can be argued that the assets within the Trust should not form part of the assets of the marriage. However, the Family Court is a very intrusive Court and, depending upon factual circumstances, the Court has intervened into Trusts or has taken account of assets within the Trust when making a decision as to the splitting of assets between spouses. Therefore, although setting up a Testamentary Trust is not perfect in preventing any claim by a spouse of a beneficiary, there may still be scope to isolate the assets of the Trust from any Family Court proceedings by the spouse of a beneficiary.
  • What are the costs of set up and administration of a Testamentary Trust?

    As the Testamentary Trust is created by virtue of your Will, it only comes into existence upon your death. Therefore, unlike trusts created inter vivos (that is, during your lifetime), there are no stamp duty consequences nor is there the need to administer a trust during your life time (administration meaning such things as tax returns, appointment of trustees and so on).

  • What issues should I consider when deciding to set up a Testamentary Trust?

    The critical issues in deciding to set up a Testamentary Trust are as follows:

    • The appointment of trustees. As the trust may remain in existence for up to 80 years after your death, it is important to carefully consider who will be the trustees. However, you would not be expected to appoint someone who you believe will survive you for 80 years, since the Trustee Act permits the resignation, retirement and appointment of trustees. It is also likely that the trust will be wound up well within the 80 year timeframe.
    • Properly determining the assets to fall into the Testamentary Trust. There would be a number of assets which would not be appropriate to have dealt with under the Testamentary Trust, such as household chattels, motor vehicles, original artworks, and so on. You need to carefully consider what assets should fall into the Testamentary Trust and where there are a series of Testamentary Trusts created for different members of the family, whether certain assets should fall into specific Testamentary Trusts for some but not all of the family members. In this regard, we need to discuss in detail your financial circumstances and, usually, we need to discuss various issues with your accountant and/or financial planner to ensure proper estate planning and due regard to the imposition of various taxes (such as Capital Gains Tax, GST and Land Tax).