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If you have:
- a sizeable estate
- a large family
- children who are spendthrifts
- children who have matrimonial problems
- children who are in a business that can benefit
from creditor protection, see Testamentary Trusts.
Sandhurst Trustees offers a full range of estate planning services.
Testamentary Trusts
A testamentary trust is a discretionary trust set up in your will. Testamentary
trusts offer flexibility, because the trustee can decide to whom to pay
income and/or capital within your family. They can also generate tax
savings, particularly if you have a number of children or grandchildren
in your family. This is because children who are beneficiaries of a testamentary
trust have the same income tax threshold as an adult, currently $6000.
In some circumstances, testamentary trusts can also be used to preserve
your surviving spouse's pension entitlements.
As the assets of a testamentary trust are not owned by the beneficiaries,
the assets in them are more safely protected against claims by creditors
(including ex-spouses) against beneficiaries than if the assets were
given direct to the beneficiaries of the will. This is relevant if your
adult children are in business, with creditors and the risk of claims
by customers, having matrimonial problems or just spendthrift. In the
case of a spendthrift, the child's ability to use the capital and/or
income of his or her share can be restricted, so that it can be preserved
for, say, your grandchildren.
Specialist advice is essential for drafting testamentary
trusts.
Testator family maintenance claims
If you have family who do not get along, or if in your will for any
reason you want to favour a family member as against other members, you
need to consider the possibility of a "testator family maintenance" claim
against your estate.
Recently the 'testator family maintenance' provisions of the Administration
and Probate Act were widened. Now anyone who has a relationship with
you, be it financial, personal, blood or platonic, can make a claim on
your estate when you die if the Court considers you have not made adequate
provision for them in your will. A Court order can be disastrous, particularly
if it necessitates the sale of a major asset such as the family business.
There are strategies for reducing the risk of 'testator family maintenance'
claims through careful estate planning. These include identifying potential
claimants and making some provisions for them, ensuring that your executor
knows the reasons for the distribution of your estate and building up Non-Estate Assets.
When we make your will, we can assist you in these often difficult decisions.
Non-Estate Assets
Some assets which you may consider are "yours" are not legally owned
by you and so do not normally form part of your estate. Often nowadays
those assets may form the bulk of your wealth.
Assets owned jointly, such as the family home, automatically pass to
the surviving owner or owners.
Superannuation (including related life insurance) is governed by special
rules and is usually paid direct to your surviving spouse or dependant
children. As the superannuation trustee normally has an independant discretion
as to whom to pay, this may not necessarily be in accordance with your
wishes. Similarly, some insurances are paid direct to nominated beneficiaries
regardless of any contrary direction in the will.
If you have a business in a family trust, it is necessary to pass control
of the trust to those members of the family who are to take over the
business.
As part of the estate planning process, all these assets may require
particular provisions in your will to ensure they are adequately dealt
with and to prevent unintended consequences, such as where one beneficiary
obtains the bulk of your wealth through non-estate assets whilst receiving
an equal distribution of your estate assets in your will. We can assist
you in this regard.
Family Business and Succession
A family business presents specific estate planning considerations.
Often you as owner want to ensure that the business continues into the
next generation. This means making the sometimes difficult decision of
who is to inherit the business and providing for an orderly passing of
control to them.
At the same time, adequate provision must be made for those members
of the family who are not interested in the business. A serious error
which many business people make is placing "all their eggs in one basket" by
building the business and having little or no other assets, such as insurance
or liquid funds, which can be used to equalise distributions in the Will.
Otherwise, there is a risk of Testator Family Maintencance
Claims.
Many business structures include Non-Estate Assets requiring
special provisions in the will. You may also need a professional adviser
to examine constituent documents, such as the articles of association
of your company, or your family trust deed to ensure that they do not
conflict with the wishes or directions in your will.
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