Testamentary Trusts – What powers of the trustee are required?

Every person has different circumstances whether it be their family members, the assets they own or control and the wishes they have for the future should they pass away.

Like each person, a Will that creates a testamentary trust is as different as they are. Some examples of types of trusts are:

  1. Special disability trusts- These are special trusts that provide for beneficiaries that are disabled, vulnerable due to inherent medical conditions and are unlikely to be able to effectively manage the assets they are gifted through the Will. If the person suffers from a significant disability either physical or mental, they may meet the Centrelink guidelines to create a special trust that allows tax fee income for their support and a capital amount paid for their accommodation or main residence purchase. Compliance with the Social Security Act and regulations must be observed I the drafting of the terms of the trust.
  2. Restricted access to capital- Often a parent is very concerned about a child receiving a substantial amount by inheritance at a young age and losing it due to a business startup, an investment failure, or a relationship breakdown, early in their lives. To give a balanced approach, many clients create a gift of a percentage of the capital at an age say 25 years and then continue the control of the executors until a later date, say they reach 35 years. This assists a beneficiary by giving access to the income but preserving some of the capital from these risks and if they lose it all the first time, they have a second chance.
  3. Change of control of assets- A Family Discretionary Trust can be used to create long term asset protection and tax minimization for a family group. By creating a mechanism for a change of control over a family trust, the Will maker can effectively make a distribution to the intended person. Careful consideration of the controller or appointor stated in the deed is required as well as the change of Director and shareholder of a trustee company. This can be done in the Will and a resolution of the company, as well as by a variation to the trust deed. Sometimes a Will maker insists on a trust being wound up and the assets transferred through to the estate trust created in the Will.
  4. Restricted powers- Often the Will maker wants to ensure the benefits of the testamentary trust are utilized and to that extent they restrict the ability of the executor to dispense with or not establish the trust. They might also restrict who can be appointed to control the trust by excluding certain individuals such as a spouse of the child beneficiary.

Every case is different, and the Will should be drafted in a way that meets the wishes of the person making the Will. You only get one chance to get it right sometimes, so it is best to make it count. Our recommendation is always allow flexibility to meet changes in circumstances and leave as much potential benefit to the intended beneficiary as possible. Ask us how by contacting Tony Crilly at Tony.Crilly@Perspectivelaw.com.

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