Benefits of a Testamentary Trust to Protect Assets & Save Tax.
Are you familiar of the benefits of a testamentary trust in a valid Will to protect assets and save tax?
What is a Testamentary Trust? A testamentary trust is a trust established through a Will that comes into effect after the will-maker's death. This legal structure allows the deceased's assets to be managed by appointed trustees for the benefit of specified beneficiaries to protect assets and minimise overall tax paid on the trust’s income.
Key Benefits of a Testamentary Trust
- Asset Protection:
- Protects assets from potential claims from creditors or relationship breakdowns.
- Ensures wealth remains within the intended family lineage.
- Tax Savings:
- Testamentary trusts can distribute income to beneficiaries in a tax-effective manner.
- Minor children can receive income taxed at adult rates rather than higher minor tax rates, resulting in significant tax savings.
- Flexibility:
- Allows for strategic distribution of assets over time.
- Provides trustees with control over when and how assets are distributed.
Examples of How a Testamentary Trust Works
Example 1: Emma leaves her assets in a testamentary trust. When her daughter later divorces, the trust prevents the former spouse from claiming a share of the inherited wealth.
Example 2: David leaves his estate valued at $1 million in a testamentary trust. His trustee distributes income to his two young children, taking advantage of their lower tax rates and saving thousands in taxes annually.
Is your Will set up to have the maximum tax advantages and safeguards of family wealth and asset protection? Talk to our team at Fincare Accountants and find out.
We can guide you through setting up a Will and if needed, a testamentary trust tailored to your specific needs, ensuring optimal asset protection for your loved ones and tax efficiency.
