Testamentary Discretionary Trusts

A "Testamentary Trust" is simply a trust established in your Will.

It has been common practise for many years for simple trusts to be established in a Will, for example monies held on trust for infant children until they reach a certain age.

Testamentary Discretionary Trusts (TDT's) are much more sophisticated, in that:

• A separate TDT can be established for each of your intended beneficiaries
• Each intended beneficiary is then placed in control of their own particular TDT, (which may only occur on them attaining a certain age)
• The beneficiaries of each TDT can be a potential broad category of people.

Example: You have three children and wish to create a TDT in your Will for each child.

Your Will provides that 1/3 of your estate is settled on each TDT. Each child (on attaining a certain age) would take control of their own TDT.

The first advantage here is that the property is not owned by the child personally but by the child on trust for that trust. First Advantage - asset protection. Each child has a broad group of people that they can choose to benefit from their TDT, including themselves, their spouse and their children.

Second Advantage - children are treated as adults for taxation purposes under this type of trust. Therefore income can be effectively split for potentially huge taxation benefits. Beneficiaries can be narrowly or broadly defined. It is usual that capital beneficiaries would only include your direct decedents.

Third Advantage - potential protection of parts of your estate for subsequent generations without being dragged into property settlement disputes on matrimonial breakdown. If a TDT interests you as part of your estate plan, we recommend that you contact Andrew Lind about this.

Tip: Unless Asset protection for a beneficiary is a driver this is usually only warranted for larger estates, in our experience estates with a net value of $500,000.00+ to be settled on each Testamentary Discretionary Trust.