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Discretionary trusts vs testamentary trusts?
A discretionary trust is created during your lifetime, while a testamentary trust is only created on your death by a Will that includes the requisite provisions and trust terms.
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A testamentary trust can qualify for income tax concessions when net trust income is distributed to minors under the age of 18. That is, any income distributed to minors is taxed in the same way as adults, and the full tax-free threshold and marginal rates apply.
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Benefits of a testamentary trust include long term protection of inherited assets from family law claims and from bankruptcy.
Do Wills deal with discretionary family trusts?
Yes.
Wills from Will Wizard include a clause that provides your executors with the authority to assume control of any non-fixed trusts or the shares in non-fixed trusts you may have at your death and instructs your executors to then pass effective control to your primary beneficiaries.
However, whether the discretionary trust can be transferred via the Will depends on the terms of the discretionary trust. Not the terms of the Will.
If you are the trustee of a discretionary trust, and are unsure of whether the terms of your trust allow for your executor to assume control over the trust on your death, seek independent legal advice.
Case Studies
This short series looks at the different personal and financial consequences of one family when the parents rely on a basic Will verses when they rely on a comprehensive Will that provides testamentary trusts and other modern risk preventative measures.
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