Will Trusts

What is a Will Trust?

A Will trust is a trust which is created upon the death of the Will maker, these are also known as testamentary trusts. A standard Will sees the entitlement of the estate passing immediately to the beneficiaries once the Will has been proved. A trust created in a Will sees a trustee holding the entitlements of the beneficiary without it actually passing to the them.

When a Trustee is holding assets on trust for the beneficiary they are not yet the property of the beneficiary. This can assist a beneficiary should they be vulnerable such as they may have a drug or gambling problem. There can also be tax advantages for the estate such as estate property which earns an income and this income is then streamed to the beneficiaries.

Here is an example of how a testamentary trust works:

A man dies and leaving his wife and three children who are under the age of 18. In his super fund he had life insurance to the value of $500,000. Let’s say she invested this money at a return of 7% per annum which would make $35,000 and she would pay tax of at least $6,650. However if the $500,000 was directed to a testamentary trust and invested the income could be spread equally to the three children and his wife which would result in no tax payable. This would then save the family $6,650 per annum in tax each year.  

Special Disability Trusts

Special disability trusts are unique trusts specifically designed around a set of rules which can assist in gifting of assets to a qualifying disabled person. The concept around the planning of these trusts is to maximise social security payments whilst also being able to gift considerable value to a disabled person to help them during their lifetime. They are a way for families to plan for the long-term care and living expenses of someone with a severe disability.

The key elements of a special disability trust are:

  • There is only one beneficiary (you can create more than one trust in your Will to accommodate other beneficiaries who may not be disabled)
  • The beneficiary must have a defined severe disability
  • Immediate family members of the beneficiary who are of age or of service pension age and get a pension are eligible for gifting concessions.
  • A gifting concession of up to $500,000 combined is available for eligible family members of the beneficiary and can only be used once. For example, if an eligible contributor gifts to a Special Disability Trust and receives a concession and then dies, his or her concession amount cannot be accessed by any other immediate family members.

Estate Planning & Wills

Estate Planning      |      Making Your Will      |      Updating Your Will      |      Will Trusts      |      Power of Attorney      |      Guardianship