A testamentary trust is a powerful tool that can protect your wealth, ensure the financial stability of your loved ones, and streamline your estate planning process. A testamentary trust comes into effect upon your death. It offers numerous benefits such as providing for minors, shielding assets, and delivering potential tax advantages. Here’s a comprehensive guide on how you can set up a testamentary trust in Australia.
Step 1: Assess Your Need for a Testamentary Trust
A testamentary trust is not for everyone. You need to assess whether it fits your specific circumstances. If you have a substantial estate, complex family situations, or beneficiaries who might need protection—such as minor children or those with special needs—a testamentary trust could be beneficial. Take the time to understand your situation and your estate planning goals.
Step 2: Consult with an Estate Planning Lawyer
Navigating the laws, regulations, and responsibilities associated with setting up a testamentary trust can be complex. Therefore, it’s advisable to consult with a legal professional specialising in estate planning. An experienced lawyer can provide valuable insights, answer your questions, and help you avoid potential legal pitfalls.
Step 3: Decide on the Terms of the Trust
Working with your lawyer, you’ll need to set the terms of your trust. This includes designating the trustee (the person who will manage the trust after your death), defining the beneficiaries (those who will receive benefits from the trust), and listing the assets that will form part of the trust. Remember, the trustee will have a fiduciary duty to manage the trust in the best interest of the beneficiaries.
Step 4: Draft Your Will
The unique aspect of a testamentary trust is that it’s established within your will. Thus, to set up a testamentary trust, you’ll need to draft a will incorporating the testamentary trust provisions. Your lawyer can guide you through this process, ensuring the legal soundness of the document.
Step 5: Sign the Will
Once the will is drafted, you need to sign it in the presence of witnesses, in accordance with Australian law. Typically, this will require at least two adult witnesses who aren’t beneficiaries under the will.
Step 6: Safely Store Your Will
After signing, store your will in a safe, easily accessible place and inform your executor about its location. Many people choose to leave their will with their lawyer or in a safety deposit box. The key is that your executor can access it when the time comes.
Step 7: Regularly Review Your Will
Life changes. Relationships evolve. Assets increase or decrease. For these reasons, it’s important to review your will periodically or when significant life events occur. If the circumstances of your beneficiaries or your relationship with them change, or if you change your mind about your trustee, your will—and your testamentary trust—should reflect these changes.
Setting up a testamentary trust in Australia is a significant task, one that requires careful thought, planning, and professional advice. While it may seem daunting, the peace of mind that comes with knowing your wealth will be protected and your loved ones cared for is invaluable. Take the first step towards securing your legacy today.
Remember: Ensure your will is valid
The testamentary trust is a part of the will. It tells which belongings or money from those belongings will be given to chosen people when certain things happen. This can only be part of a proper will. It must clearly say who the people receiving the belongings or money are, who will take care of the belongings, and what those belongings are.
Your will must include the following elements. Otherwise, it might not be valid.
- The will must be written down. The person making the will, or someone else chosen by them, should sign the will. This might happen if the person making the will can’t read or write or is too sick to sign themselves. But if someone else signs it, it must be done while the person making the will is there to see it.
- The person making the will, or the person signing for them, should sign it while at least two other people are watching.
- These two people should be able to say that they saw the person making the will sign it. They should also sign the will themselves while the person making the will is watching.
- The person making the will needs to understand what they’re doing. They should know what’s in their will and what it means for their belongings after they die. People who are too young, have dementia, or are drunk usually can’t make a will.
How to get started
Our law firm is very experienced in Estate Planning. We can help you create a testamentary trust. Contact us here.