What is a testamentary trust?
Published 18 Feb 2015
Author: David Cossalter
Testamentary trusts enable the writer of a will to distribute their assets conveniently among selected beneficiaries once they die.
Setting up a testamentary trust is a common part of estate planning, particularly for people leaving money to someone aged under 18 years old.
A trust involves choosing a designated trustee, who will hold assets on behalf of a beneficiary. Children, for example, would have their inheritance managed by the trustee until they were at an age where they are old enough to receive it.
Testamentary trusts have a number of benefits, including favourable tax rates and protection of the estate. There are also discretionary trusts that typically appoint the beneficiary as the trustee, enabling greater management and flexibility over the assets they have been bequeathed.
A third-party trustee can be put in place on discretionary testamentary trusts, allowing them to step in when certain circumstances arise, such as an impending bankruptcy on the beneficiary’s part.
For many people writing a will, trusts provide a more efficient way of distributing their assets in a way that better meets their desired outcomes.
However, the courts have far-reaching powers in inheritance disputes, and testamentary trusts are still open to family provision claims.
Can I make a family provision claim?
If you feel a loved one’s will has not outlined adequate provisions for you, then launching a family provision claim is an option you may be forced to take.
For example, the deceased may have set up a trust for you, but failed to provide you with any other direct benefits from the estate. In other words, you could be left with no immediate financial support.
Alternatively, you may have been left out of a will entirely, which could mean you are entitled to money that has been ring-fenced in a trust for other people.
In these situations, contacting a contesting wills lawyer in NSW could help you to argue your case through mediation or the courts.
Provided you are an eligible person and initiate a claim within the required timeframe, you could overturn the measures set out in the will and receive an immediate share of the estate.
People who can prove they are in a difficult financial situation often have a greater success rate, especially if the terms of the trust place an unfair burden on the beneficiary.