Wills prepared by a lawyer may include a testamentary trust that protects your assets and supports your vulnerable beneficiary.
The short, simple wills do not have these solutions. In my experience, the standard form wills often leave your estate and beneficiaries exposed to predators and creditors.
Here is a brief explanation so you understand the solution, however, it is not advice. It is best to meet a lawyer for legal advice with respect to your circumstances and preparation of your will if you want any of these solutions.
With a ‘simple’ will, the assets pass to each beneficiary directly. This means that the assets you have passed on are at risk:
- Family Law claims – If your beneficiary is involved in a marriage or de facto relationship that breaks down, the beneficiary’s former spouse may make claims against the beneficiary’s assets. What about the complexities of blended families these days and step-children?
- Bankruptcy – Similarly, assets held in your beneficiary’s own name are vulnerable to claims from the beneficiary’s creditors. For example, if the beneficiary makes an investment that goes bad, or someone has an accident for which the beneficiary is held liable, then your hard-earned assets may be used to pay the debts.
Having a clever will where you place your assets in a testamentary discretionary trust of which your beneficiary is not the trustee helps insulate your hard earned assets from such claims. This is because technically (legally) the trustee owns the assets and, as it is a discretionary trust, the beneficiary does not have a fixed entitlement to the assets.
A trust is a common and powerful structure where the “legal” and “beneficial” ownership of an asset are separated. The trustee officially has legal title to the asset but holds the asset for the benefit of the beneficiaries.
Beneficiary Support Trust
Also called a “Protective Trust” or “Capital Protected Trust”, a Beneficiary Support Trust is a special type of trust created under a will for one particular beneficiary where the beneficiary does not have any control over the allocation of the assets. This is especially useful where there is a concern that the beneficiary may be unable to manage his/her own finances – for example, a child with an intellectual disability or a problem with drugs, alcohol or gambling.
The trustee would hold the asset and your supported beneficiary would receive the income.
Special Disability Trust
A Special Disability Trust is a trust created for one particular beneficiary who has a “severe disability” (as defined by legislation). If the terms of the trust comply with the requirements of the Department of Social Services, assets in the trust are exempt from means testing by Centrelink and the Department of Veterans’ Affairs (up to a maximum value of about $669,750 at the time of writing and this amount is indexed to increase annually).
Now you are aware of 3 solutions available to you through a lawyer prepared will with testamentary trusts that protect your assets and your beneficiaries.
Should you contact our office, a lawyer could discuss placing your business or real estate portfolio into a testamentary trust to preserve it for your children, their children and your future great-grandchildren. This would protect those assets from predators and creditors.
Further, we could include tax planning options which your beneficiary could use to save on taxes.
These are things we can look at together and put in place for you.