Testamentary Trusts

[Jackass]

Is it necessary to use a Testamentary Trust in a will if your properties are already held in a family trust?

I recently had a Testamentary Trust set up for me and there is a clause in my Will that expresses the wish for the Executor of my estate to wind up my existing family trust as soon as practicable after my death. I can't see why this should happen.

Wouldn’t the Executor of my estate (acting as Appointer) appoint a new trustee, leave the investment properties in the family trust and continue distributing income to the beneficiaries who are the intended beneficiaries of the will anyway?

When should a Testamentary Trust be used?

 

[NickM]

Jackass
A testamentary trust generally comes into play with regard to your personal assets.

It is by far the best estate planning tool i have dealt with.

You should speak to your advisor and ensure that the testamentary trust can / will become a beneficiary of your family trust. this will allow the family trust to continue, with the potential benefit of tax effective distributions flowing down to minors.

NIckM

 

[StevenO]

Hi Jackass,

I'm trying to find out the same sort of thing in regards to Wills and Family Trusts so I've made an appointment with my advisor for next month to get some answers. Although I can't help you out with your question at the moment, I've got a few more to add to this subject.


Wouldn’t the Executor of my estate (acting as Appointer) appoint a new trustee, leave the investment properties in the family trust and continue distributing income to the beneficiaries who are the intended beneficiaries of the will anyway?


If the executor in your Will was also an existing beneficiary of your family trust, what's stopping them from appointing themselves as trustee and distributing all the assets in the trust to themselves? The other beneficiaries who you intended to benefit from your trust would miss out altogether. Besides ensuring that you select a trustworthy executor in the first place - what else can be done to prevent this from happening?

If on your death the executor replaces you as the appointer and trustee of your family trust and decides to keep the assets in the trust and continue providing an income to the beneficiaries (as requested by you in your will) - what happens if this new appointer/trustee then passes away? Wouldn't their executor step in and take their place at appointer? If this happens how can you be sure the beneficiaries of your family trust continue to receive income and that the property remains in the trust as you have requested in your will?

 

[Terry_w]

I recently had a Testamentary Trust set up for me and there is a clause in my Will that expresses the wish for the Executor of my estate to wind up my existing family trust as soon as practicable after my death. I can't see why this should happen.

Wishes are just wishes and not legally binding. Winding up a trust will mean stamp duty and CGT on the transfers too.

Generally not a good idea, but it would get the trust assets - possibly - into a testamentary trust (subject to trust deed) which has a more favourable tax treatment for children.

 

[Terry_w]

it is a terrible idea to have the executor of your estate control 'your' trust after death. Often the executor named in the will doesn't want to take the role and it can end up in the hands or someone else, another family member or a professional trustee.

As Steven says what if the executor is also a beneficiary. They could just wind up the trust and benefit themselves.

You need to follow the rules of the deed and carefully consider the next appointors and trustees of the trust and also back ups after that.