Ronald and Rebecca are married with three adult children Lucy, Kate and Mark. Ronald receives an Age pension and is a compulsive gambler.
As a result and by agreement Ronald’s pension is deposited into Rebecca’s account so he does not gamble it all away. Rebecca has left her entire estate to Ronald. If he dies before her the estate is left equally to her children.
Lucy, Kate and Mark are concerned that if Rebecca dies before Ronald, he will gamble the estate away and Ronald will become financially dependent on them and/or will incur gambling debts that he will not be able to repay.
Rebecca could prevent this from occurring is by setting up a testamentary trust in her will.
A testamentary trust is a trust set up by the will-maker in his/her will. To create a testamentary trust the will must set out:
(a) the property that is designated trust property
(b) the beneficiaries who benefit from the trust
(c) the trustee(s) who manage the trust
(d) the appointer who appoints trustees
(e) the terms and conditions upon which beneficiaries derive income or capital from the trust.
Rebecca can settle her estate in a trust for the benefit of Ronald, and appoint any or all of her children as trustees. She can direct her trustees how to manage trust property for the benefit of the beneficiary in this case Ronald, for example by paying him income derived from capital and not capital.
Other potential benefits of a testamentary or disability trust may include:
· protection of Rebecca’s estate from not only Ronald but Ronald’s partner if he should re-partner;
· Ronald’s pension might remain unaffected or be less affected
· Some tax benefits
If you need the advice of a experience lawyer to draft your will or assist you in the administration of an estate call Dominic Wilson on 02 8268 4000.