Testamentary Trusts Avoid the Tax Squeeze

Recent Federal Government announcements suggest testamentary trusts will be exempt from the proposed 30% minimum tax on discretionary trusts. For families using testamentary trusts as part of their estate planning, this is welcome news.

What Is a Testamentary Trust?
A testamentary trust is created under a Will and can be a powerful tool for:

• protecting assets for children and vulnerable beneficiaries;
• managing inheritances after death;
• allowing income to be distributed tax-effectively;
• protecting family wealth from relationship breakdowns, bankruptcy and poor financial decisions.

One of the key attractions of testamentary trusts is that, in appropriate cases, income distributed to minor beneficiaries can be taxed at adult rates. This can allow a child to receive up to around $22,000 per year tax-free from the trust, depending on their circumstances. That can make a real difference when trust income is being used for school fees, medical expenses, living costs or future savings.
 
What Has Changed?
The Government has announced that testamentary trusts will not be caught by the proposed 30% minimum tax that was expected to apply to many discretionary trusts.
This means the tax benefits that have traditionally been available through testamentary trusts may continue to be available for families using them as part of their estate planning.
The Government has not yet released all of the details, and the relevant legislation has not been passed. However, the announcement is encouraging and suggests that testamentary trusts will continue to be an effective estate planning tool.
 
What This Means for Families
The winding back of these proposed tax changes may help preserve testamentary trusts as a flexible and effective estate planning strategy.
It is also a timely reminder that tax and succession laws can change quickly — and estate plans should not be left gathering dust.
If your Will includes a testamentary trust, or if you are unsure whether it should, now is a good time to review
 
How We Can Help
Our estate planning team can assist with:

• preparing Wills with testamentary trusts;
• reviewing existing Wills and trust structures;
• succession planning for families and business owners;
• asset protection strategies; and
• probate and estate administration.

 
Protect your family. Plan ahead.
Contact us to book an appointment with our team today.