TESTAMENTARY TRUST

A testamentary trust is a trust which is created through a will. It is generally a discretionary trust – where assets are held for the benefit of a class of beneficiaries. The trustee has full discretion over the amount (and proportion) of the benefits received by the beneficiaries.

Investors establish testamentary trusts via their wills for the following reasons:

Tax Advantages – Income generated from the trust can be distributed to beneficiaries in lower tax brackets, thereby minimising the overall tax liability.
Protection of Assets – Assets held within the trust will be protected from creditors (for example if a beneficiary suﬀers bankruptcy).

Other things to consider:

Trust Costs – ere may be initial and ongoing costs for establishing and managing the trust.
Capital Losses – Capital losses are retained in the trust and can o set any future capital gains from the trust. They are not passed onto the beneficiaries and so cannot o set personal capital gains.
Land Tax – ere may be higher rates of land tax payable on properties owned within the trust.

Risk Planning

Through proper structuring, protection of assets against creditors can be achieved.
The major risk categories are:

Financial risk
Business risk
Personal risk
Family/divorce risk

Leaving a legacy

A trust is an entity that will outlast you and does not terminate even after your passing (unless decided by the trustees). It can, therefore, own properties and assets for generations, and then pass this portfolio of assets to the next of kin or heirs, tax free.

There are many tax advantages to properly structured trusts. Please contact us for tax structuring advice based on your personal needs. A Trust is an entity that will outlast an individual. It will not terminate (unless decided by the Trustees), therefore it can own properties and assets for generations, and pass the portfolio of assets to the next generation, tax free.

A Trust is the only vehicle that allows the accumulation of wealth and the transfer of assets from generation to generation without incurring costs and taxes. By taking action, founders can ensure their children receive all the present wealth and assets they have accumulated. The dilemma that employment, economic cycles and market conditions present can be avoided for founders’ children if they know that there is an income-producing Trust providing passive income streams (primarily through property).

Risk Management

The financial planning affiliate partner team can assist with risk planning and the protection of assets against creditors. As you may be aware, personal liability is limited to the assets in an individual’s name. Creditors cannot access the assets in a trust, unless it was set up with the intention to defraud creditors. Each risk poses a potential threat that could result in dire consequences. Through using the services of the financial planning affiliate partner team you are able to minimise or do away with such risks right from the start.

Protection of a Minor

In Australian Law, a minor cannot be the registered owner of property. Assets are also protected against spendthrift children, who will not be able to reduce the assets to zero.

Multi-Ownership of Assets

Some assets cannot be divided (e.g. businesses, farms or other property). By placing these types of assets in trust, the heirs can be the beneficiaries of the income generated by the assets.

Fees

You will find Cornerstone Wealth Management strategic partners fees very competitive. Fees are generally based on the value of the services being provided and/or the assets under management. However, fees can vary depending on the nature of the assets, the type of trust and the level of administration required.