What is a Testamentary Trust
By Peter Thompson – Estate Planning Lawyer
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Quite simply; a testamentary trust is a way of holding assets after someone dies.
A testamentary trust is created by a Will. A Will only comes into effect after the Will-maker dies.
Wills often includes gifts with conditions attached. Such gifts and conditions are the responsibility of the appointed Executor as a Trustee to attend to, this creates a Testamentary Trust.
Even the most simple Will is a form of Testamentary Trust. A Will appoints an Executor and the Executor then holds the assets, on trust, to distribute to the beneficiaries named in the Will in accordance with the terms of the Will.
When lawyers refer to a Testamentary Trust Will, they usually mean a Will that includes a special set of conditions to benefit one of more beneficiaries which will run for a period of time after the death of the Will maker.
Testamentary trusts can be flexible, useful and appropriate such as;
- Providing for disabled children
- Protecting estate assets from creditors
- Allowing a Bankrupt beneficiary to still benefit from a Will.
- Providing for children who are “not good with money”
- Providing support for children whilst ensuring that estate assets eventually pass on to grandchildren
- Allowing a spouse or family member to live in a property with conditions.
- Creating a flexible situation for the distribution of assets and income between family members.
- Tax planning and legitimate minimisation of tax including income tax, capital gains tax and stamp duty.
A well drafted Testamentary Trust Will can deliver huge advantages to beneficiaries without being restrictive or costly to manage.