Testamentary Trust – Types, Advantages & Disadvantages

Testamentary trusts are the trusts formed by a Will maker, and they are created concerning the Will, which comes into effect after the death of the Will-writer. The assets set to be distributed to the beneficiaries are kept on hold till then.

One advantage of a testamentary trust Will is that it properly protects the asset until it reaches the beneficiary. Besides, it also provides various other kinds of protection and increases flexibility.

Take a look at the types of testamentary Trust Will and how they function.

Types Of Testamentary Trust –

The idea of a testamentary trust can be confusing. This is why it is divided into two main types.

1. Discretionary Testamentary Trust

A discretionary means the individual who has complete control of the trust fund. The discretionary testamentary trust funds are mainly organised for the beneficiaries as trusted relatives of the deceased.

Here, the responsibility to decide and manage the distribution of assets falls on the Trustee.

Read Also – Role of an Executor

2. Protective Testamentary Trust

A protective testamentary trust is when the Trustee is free from making decisions. Instead, another person needs to take the role of decision-maker. Here, the Trustee has no control over asset management and distribution.

These trusts are created specifically for the beneficiaries who need help managing their funds. For example, protective testamentary trusts are applied in the case of a minor child or a person with mental disability.

Advantages of Testamentary Trust Funds

There is a reason why testamentary funds are still as relevant. Testamentary Trust Will Lawyers, Perth, often recommend this type of Trust because of the following benefits.

• Testamentary Trust provides complete protection of the assets yet to be inherited. In many cases, beneficiaries are known to claim funds or assets before the death of the Willmaker. Testamentary Trusts prevent early claims. These Trusts protect against family law proceedings as well.
• In some cases, former partners can claim inherited funds as they are also considered the partner’s property. With testamentary funds, former partners cannot make such claims.
• Some Trustees might be too young, are considered minors, or might have a cognitive disability. A special type of Testamentary fund is applied for them in such cases. These protective testamentary funds give control to a trusted person who can make decisions on behalf of the beneficiaries.
• Testamentary Trusts also protect beneficiaries who have a problematic history of careless spending, gambling, or substance abuse.

Disadvantages of Testamentary Trust Funds

Now that you know the advantages, check if Testamentary Trust is worth the disadvantages. Check with a will lawyer today to learn more.

• The cost of a testamentary trust fund in Australia is high. The appointed executor will also need to apply for tax routinely. Besides, there will be additional costs for ensuring tax returns.
• Setting up the Trust is a complicated process. However, with proper advice from legal personnel, you can get going.
• One must follow a series of steps to set up a testamentary Trust. They have to identify the funds, Whom should appoint a Trustee, list the beneficiaries, and revise the rules of the Trust. After the death of the Willmaker, the executor needs to cover several other responsibilities to execute the Will successfully.
• Though it provides high protection, the beneficiaries will not have much control over the funds until the death of the Willmaker. It is also important for the Willmaker to choose trusted beneficiaries and provide proper instructions.

Conclusion

Before setting up a testamentary Trust fund for yourself or a close relative, weighing advantages and disadvantages is important. Read about why many are putting their faith in this Trust fund Will instead of the usual Will.

The two types, discretionary and protective testamentary funds, function differently. They are created to cater to different types of Trustees. Estate planning lawyer in Perth suggests setting up a Trust because of their security.

Testamentary Trust Fund Wills is a great way to ensure intergenerational wealth transfer. To fetch these opportunities, learn how to set up a Trust today.