What assets can be included in a testamentary trust?

Date: Jun 23, 2015

Testamentary trusts are frequently used in the estate planning process, as individuals look to ensure their assets are retained for future generations. By keeping assets within a legal entity, in which management of the assets is separated from those who stand to benefit from them, the assets can be protected and the benefit can be distributed in different ways from making outright gifts.

However, testamentary trusts are a complicated area of estate law, and require expert legal advice in order to be implemented properly.

To assist those looking to implement a testamentary trust, here are three asset classes that can be included within a testamentary trust:

1) Real estate

Investment properties or a family home can be held in a testamentary trust, with any revenue generated by these assets then passing to the named beneficiary of the trust, and the capital distributed according to the testator's wishes.

As with other assets, real estate requires the testator  to have ownership of the assets before they can be placed in a trust. For a family home held in a joint tenancy, the death of either party will result in the jointly owned assets passing to the other party regardless of what is in the will.

2) Investments

Along with property, other classes of investment, such as shares and financial products, can be included in the testamentary trust of a deceased person.

This asset class also covers cash held in a bank account, for example with the interest passing to the named beneficiary or beneficiaries of the estate.

3) Valuable assets

Assets that can be included in a testamentary trust aren't limited to those that will generate revenue for the beneficiary, such as real estate. Non-financial assets can also be legally protected through a trust mechanism.

These assets might include paintings, jewellery or furniture that is valuable enough to be entrusted to a legal structure of this manner.

While the beneficiary of this arrangement won't find themselves receiving a regular income, this arrangement can still be useful for preserving assets, especially if they hold significant sentimental value for the family.

Assets cannot be held in trusts in perpetuity and must at some stage vest in a beneficiary.

Difficult tax questions can also arise depending on how assets are held and distributed.

Regardless of the assets you are looking to give to a testamentary trust, it's important to seek the advice of a specialised wills and estates lawyer. They can offer advice that suits your personal position and assist you with the process of constructing your will to establish a trust.