OPINION: Simple Will no longer appropriate

Simple Will no longer appropriate

MARY has two children in their late 40s.

Her children encourage her to update her will.

Mary consults a solicitor who specialises in wills and estates.

The solicitor reviews her existing will and explains that in light of her current financial circumstances, a “simple” will is no longer appropriate.

Given that each of her children stand to receive an inheritance of around $1 million, the solicitor recommends a “testamentary trust” will (TT Will) as a more effective vehicle for them to receive their inheritance.

Rather than each child receiving $1 million personally, the will creates a separate trust for each child to receive these funds.

Each child is the trustee of their own trust and each has the discretion to manage the trust as they see fit.

These types of wills provide important benefits in terms of tax planning.

They allow Mary’s children to distribute the income that is earned from the investment of their inheritance amongst their bloodline descendants, including minor children, who under this structure, receive the benefit of an adult’s tax-free threshold, allowing the family as a group to pay much less tax than would otherwise be the case.

These wills also have important asset protection benefits.

Given that the trust is a separate “entity”, their inheritance can obtain greater protections if the child is the subject of a claim against them, whether by a creditor or in the event of a breakdown of their relationship.

A TT Will contains similar provisions to those contained in family trust deeds and being more complex than the average will, should only be drafted by solicitors specialising in estate planning.

TT wills can also contain provisions that deal with vulnerable beneficiaries who have disabilities, are spendthrifts or have gambling or drug issues.

It is also important to consider including an “opt out” clause, which allows a beneficiary to not use the trust structure if they so desire.

Email Manny Wood, Principal Solicitor and Accredited Specialist in Wills and Estates at TB Law at manny@tblaw.net.au or call him on (02) 66 487 487.

This column is only accurate at today’s date and cannot be relied upon as legal advice.

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