Testamentary Trusts – A Vital Tool for Legal Practitioners

Why Legal Practitioners Should Recommend Testamentary Trusts

A testamentary trust is a powerful estate planning tool created by a will, typically structured as a discretionary trust. It enables the testator to direct a trustee to hold and manage assets for the benefit of specified beneficiaries, ensuring financial security and strategic asset distribution.

As a legal practitioner, you play a crucial role in advising clients on protecting their wealth and securing their family’s future. Testamentary trusts are widely recommended by financial planners and accountants due to their strong asset protection features and tax advantages.

Key Benefits of a Testamentary Trust for Your Clients

1. Asset Protection

Your clients want to ensure that their wealth is preserved for their family members. Testamentary trusts offer protection in cases such as:

• Protection from creditors – Shields beneficiaries involved in high-risk businesses.
• Divorce and Family Law Claims – Helps prevent asset division in the event of a marital breakdown.
• Spendthrift or Vulnerable Beneficiaries – Provides financial management for minors or individuals with poor financial habits.
• Preserving Wealth for Future Generations – Ensures the benefit of assets pass to children and not to a new spouse or unintended parties.
• Caring for Special Needs Dependents – Guarantees long-term financial security for disabled or vulnerable beneficiaries.

Since the trustee holds legal ownership of the assets while beneficiaries receive the financial benefits, testamentary trusts provide a layer of legal protection against claims and potential misuse.

2. Taxation Benefits for Estate Planning

For clients with significant assets—whether from business sales, superannuation funds, or life insurance proceeds—testamentary trusts provide notable tax efficiencies:

• Children under 18 receive income taxed at standard adult rates rather than at penalty rates.
• Utilization of Tax-Free Thresholds – Family members can maximize their individual tax-free allowances.
• Tax-Effective Income Distribution – Income, capital gains, and franked dividends can be distributed among beneficiaries for optimal tax outcomes.
• Long-Term Tax Concessions – Tax benefits extend to income and capital gains generated from reinvested inherited assets.

Legal Precedents for Testamentary Trusts

To assist legal professionals, we offer expertly drafted precedents:

1. Will Creating One Testamentary Trust
2. Will Creating Multiple Testamentary Trusts
3. Family – Discretionary Trust
4. Will + Testamentary Trust – Simple
5. Will Signing Instructions
6. Checklist
7. Testamentary Trusts Fact Sheet 

As a trusted legal practitioner, recommending testamentary trusts strengthens your client relationships by offering robust asset protection and tax-efficient estate planning solutions.

Access our precedents today and elevate your estate planning practice!