Protect your assets with a testamentary trust

Date: May 14, 2012

There are various ways to protect our assets after we are gone, but seeking family law adviceon a testamentary trust could be one of the most effective.

In the majority cases, you will have full discretion over how your assets are allocated - if you want certain family members to benefit, then this is one way of ensuring it happens.

Unless your assets are protected, several situations could arise that are beyond your control, the effects of which can be mitigated by establishing a testamentary trust.

For example, you might be concerned about the beneficiaries of your trust becoming bankrupt - particularly if they have business interests to take care of.

On a more personal level, beneficiaries may be at risk of divorcing their partner or splitting from a de facto relationship, both of which could lead them to experience financial difficulties.

Hardship might also arise from caring for disabled children, but you can provide some financial assistance by making provisions through a testamentary trust.

If one of your children should face financial hardship and actually become insolvent, they might be forced into bankruptcy and if they have already received their inheritance it will automatically pass through their bankruptcy trustee to the creditors.

Certain kinds of testamentary trust may prevent this from happening, and can also guard the assets if one of your preferred beneficiaries is irresponsible with money.

A will is still essential, however, as it is used to set out the terms of a testamentary trust alongside any other wishes you may want to be carried out in the event of your death.

Once you have decided to establish a testamentary trust, you will need advice on the many ways in which the trust can be set up – who should be the trustee, who the beneficiaries, and how much (or little) control the beneficiaries should have. 

This is also very important from a tax perspective as certain trusts can be used to distribute income tax effectively.  

This will help ensure your wishes are carried out as you planned, so make sure you select someone who you believe you can trust to be the executor and trustee.

If you don't have confidence in anyone, there is always the Public Trustee.

In a situation where you want your assets to be invested and managed in the best interests of the beneficiaries, then a trustee  with suitable experience and qualifications should be selected to control the testamentary trust.

Once again, this needs careful consideration, as they will ultimately be responsible for distributing your assets and protecting them in line with your wishes when you are no longer around.