Worried about the kids blowing your life’s work?
As the festive season gets underway and families spend time together, many parents may give pause to thoughts about what will happen to their lifetime’s work, or family fortune, when they are gone.
The distribution of the family fortune to your beneficiaries can be a source of great anxiety, especially if you are worried that the descendants might blow their inheritance or it disappear into someone else’s pocket after you’re gone.
Fortunately there’s a way to put your mind at ease, an insurance policy of sorts to protect your decades of hard work beyond the grave – a Testamentary Trust. A testamentary trust is a trust that only becomes active after the will-maker’s death, once probate has been granted.
Essentially the testamentary trust holds and manages assets for your beneficiaries pursuant to the terms of your will. The trust is created within the will itself and your lifetime’s work, your estate, is left to the trust, instead of individuals.
The will then includes a trust deed with a written set of rules that set out how the trust can operate, things the trust can and can’t do, together with the forms of investment it can and can’t make.
The trust deed also sets out who the beneficiaries of the trust are.
*Asset Protection
With money or assets being left to a trust instead of to individuals, that means the money and/or assets are not the property of the individual beneficiary and never have been, making the assets unobtainable to creditors. This is particularly important if there are family law proceedings in play.
*Tax Advantages
Usually a child under 18 can earn $416 from a trust before they pay tax at the top rate, however a beneficiary under 18 who receives income distributions from a testamentary trust is taxed at the same tax rates as an adult. That means they can receive $18,200 tax-free which is significantly higher than $416.
*Control Over How and When Inheritances Are Distributed
A trustee oversees the assets to ensure that the assets benefit the beneficiaries for a set period as set out in your will.
The important point is to have someone not in the relationship, in charge of the trust, as the trustee. The trustee’s legal role is to act for the beneficiaries listed in the testamentary trust – no one else – and strictly in accordance with the rules of the trust as set out in your will.
If you’re worried that your family fortune might disappear after you’ve gone, then contact Ahern Sierakowski and we can discuss your specific needs – info@aslawyers.com.au
