A testamentary trust is one of the buzzwords of 2018. Everybody wants one, but quite simply, not everybody needs one.
Our senior solicitor, Greg Martin, explains:
People set up testamentary trusts to safeguard their assets by an arrangement with the trustee who manages the money for the benefit of one or more beneficiaries.
This may occur where, for example, the beneficiary may be mentally disabled, drug addicted, or perhaps involved in a bitter divorce.
The downsides of a trust include the fact that you have to submit annual tax returns, which therefore lead to annual accounting and legal costs, and there may be disputes if someone is the sole beneficiary of a trust. In any event, the Family Court can look through testamentary trusts to determine whether or not assets really belong to that person.
Some family businesses like to create testamentary trusts so that they can continue the business into the future, but again, in my view, that should only be done after a discussion with a view to all parties agreeing that they will continue to work in the business in the future. If they don’t, then you’re better off with a corporate structure rather than a testamentary trust.
Ultimately it is up to you, and you should speak to your beneficiaries about what they want to do, rather than creating potentially artificial structures which have quite large accounting and legal costs involved.
A recent article in the Sydney Morning Herald discussed testamentary trusts in addition to other matters.
If you need any advice about wills and estates or testamentary trusts, then call Martin Bullock Lawyers on 02 9687 9322.