Testamentary trusts

Often, children inherit the fruits of a lifetime of their parents' hard work, only to lose it all in a few short years. Bankruptcy, family law and unwise investments can easily wipe out inheritance. An effective protection is for your will to contain testamentary trusts.

This means that, instead of your will leaving a share of your estate to each child, that share will be placed into a separate trust for each child. For younger children, the trustee, initially, would usually be the same person as the executor of your will. When the child becomes old enough to be responsible, then he or she obtains full control over the trust.

Money or assets can be taken out of the trust at any time. However, so long as money or assets remain in the trust, they are sheltered. For example, if your child inherits from you under a will without a testamentary trust, then goes bankrupt, the inheritance will be lost. However, if the child only inherited control over a trust, then he or she can truthfully say that they received no assets from you, so that the inheritance would be unaffected by bankruptcy.

There are also potential tax advantages, whereby the income which your child might otherwise receive from income producing assets can be split with your child’s spouse and children.

If you require any further information, please contact Stephen Lynch

or contact us on (02) 9923 2321 or enquiries@somervillelegal.com.au