Testamentary trust

I have been advised to set up a testamentary trust for my family in my will. What is it and what do you think of them?

They are used for wills and permit you to specify assets and you can leave instructions about them, for example, $200,000 to be used for educating your grandchildren. A trustee goes with the trust, and they will manage the assets for the beneficiaries. It means someone can die and the assets can be, say, invested. The wealthy have used these trusts to reduce their tax bills or to look after someone who needs supervision.

The trustee has ownership in trust of the property on behalf of the beneficiaries. The trustee can be left instructions or can be left to decide. Be careful of 'official' or company trustees because they can be expensive.

If your accountant or adviser suggests a trust to reduce tax, ask them how it works. Get them to compare your tax bill with or without a trust and make sure you know the pros and cons.

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Testamentary trust

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