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Testamentary Trusts

There are 4 main forms of testamentary trusts created in Australian Wills, ie: trusts that are:

  • Beneficiary controlled and fully discretionary, designed to enhance an inheritance and give the particular primary beneficiary as much flexibility as possible;
  • Capital reserved, designed to ensure that the lifetime beneficiary receives control of trust income, but not trust capital;
  • Accommodation funds, designed to provide a home or other suitable accommodation for the rest of a beneficiary’s life; and
  • Protective, designed to have the trust funds and the trust income managed to meet the needs of the lifetime beneficiary.

All 4 forms of testamentary trusts are able to protect against a future bankruptcy of a beneficiary and can improve the prospect of defending a family law claim against a beneficiary. Beneficiary controlled testamentary trusts, in particular, also enable the splitting of trust income with family members and related entities, with beneficiaries under 18 qualifying for more favourable income tax rates.

Personal trust summaries are available from Estate Planning Equation – Preventative Law for these key types of testamentary trusts.

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