Why A Will On Its Own, Is Not Enough To Secure Your Wealth

Dominique Grubisa
Dominique Grubisa

Published 1:00 am 20 Nov 2020

Facebook Twitter Whatsapp Linkedin

Increasing numbers of Australians are waking up to the benefits of ‘testamentary trusts’ when drawing up their wills. As well as offering potential tax benefits, such trusts can protect the inheritance you pass on to your children, long after you are gone. DGI Founder and CEO Dominique Grubisa explains more.

Most of us think we are taking care of our children and other beneficiaries when we sit down and complete a will and testament. We look at the assets we have, write down who should get what, and then sit back, expecting everything to run smoothly once we are gone.

The problem is that life can get messy.

→ EMERGENCY Webinar Briefing on How To Safeguard Your Wealth While You Profit Safely

What happens, for example, if soon after you die your son gets a divorce, and his now ex-wife walks away with half of the inheritance you left him? Or if the hundreds of thousands of dollars you left your daughter are lost when one of her business deals goes bad and she is forced in bankruptcy. What about if much of the inheritance you are passing on is gobbled up by taxes, because your beneficiaries are in high tax brackets?

This is where testamentary trusts can be invaluable. This increasingly popular form of estate planning allows individuals to manage the future distribution of their assets in ways that can be both potentially tax effective for their beneficiaries and provide significant asset protection.

Maximum benefit for beneficiaries

So how does a testamentary trust work?

With a regular will and testament, after probate is completed the executor distributes the various assets in the estate directly to the beneficiaries according to the deceased person’s instructions.

Where someone has made provision for a testamentary trust in their will, the procedure is different. Rather than being directly distributed, the assets are held in trust, with a trustee overseeing their management. The trustee is then able to distribute the assets in a manner and according to a timeframe that brings maximum benefits to the beneficiaries. Unlike assets held directly by the beneficiaries, funds that remain in the trust don’t form part of an individual’s tax liability and aren’t generally able to be accessed through litigation. Obviously, choosing a reliable and competent trustee is essential.

Here are five key scenarios where the provisions of a testamentary trust could help you and your beneficiaries:

1. Tax advantages: Tax effectiveness is one of the key uses of a testamentary trust. If a beneficiary of a will is a high-income earner and any assets they receive will be taxed at the highest marginal rate, the trustee may opt to distribute the assets to a family member of the beneficiary, such as a wife or child, who is in a lower tax bracket. In this way, the overall tax that the beneficiary’s family pays on the assets may be reduced or even eliminated.

2. Family crisis management: Remember the scenario above where a divorce robs your son of his inheritance. Funds held in a testamentary trust aren’t considered as belonging to any one individual, meaning the Family Court can’t order that they be shared in the case of a divorce. Once his divorce is finalised, your son might work with the trustee to have his full inheritance released to him.

3. Inheritance protection: We’ve all heard stories about young adults wasting large inheritances due to their lack of maturity. With a testamentary trust, the trustee can be given instructions to delay handing over an inheritance until the recipient is ready to manage it responsibly.

4. Child protection: A grandparent may wish to leave money for a young child’s education or some other special purpose, but not feel confident handing it directly to the child’s parent. A testamentary trust allows money to be put aside until it’s time for the child’s school fees or other bills to be paid.

5. Inheritance equalisation: Sometimes money outside the main estate forms part of an inheritance. For example, any leftover superannuation is likely to be paid to your dependents. If your desire is for beneficiaries to be paid the same amount, the trustee can take these outside payments into account when dividing up your estate.

So, don’t rely on a basic will to manage the distribution of your assets following your death. By making provisions for a testamentary trust, you can give your children and other beneficiaries the best possible chance of enjoying – and holding onto – the inheritance you leave them.

To learn more about asset protection, register now for our emergency webinar briefing where you’ll learn how to safeguard your wealth while you profit safely.

MWC Webinar Banner

Good Debt Vs Bad Debt With Dominique Grubisa - DG Institute

Lawyer, Asset Protection Specialist and Property Educator

Dominique Grubisa is a practicing lawyer with over 25 years experience. She is a property investor and developer, an entrepreneur with businesses in Australia and Southeast Asia, a speaker, educator, writer and published author.

This column has been written for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such.

About DG Institute

Founded in 2009, DG Institute strives to empower everyday Australians to grow and protect their wealth. Our goal is to provide direction, motivation and inspiration to our clients and help them perform at their very best. We do that through our professional services, in addition to teaching them how to grow their wealth through property and business education.

This column has been written for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such.

Our Happy Clients

  • Lisa Mitchell

    "My name’s Lisa Mitchell. I live in Chatswood in Sydney. Since joining the Elite Mentoring Program. I’ve done two deals made around $240,000. And probably when I add the extra rental that’s coming, it’s another $70,000. I could not be happier with that result. And I’m amazed by it, to be honest, I’m absolutely amazed. […]"

    Lisa Mitchell, Property Uplift Elite Mentoring Graduate

  • Jennine Kimbal

    "Janine Kimball from Newcastle since joining DG Institute we have two projects currently in progress with a gross realization value of about 10 and a half million dollars expected profit from those is going to be probably around $1.8 million when they complete the reason we joined DG Institute and the Elite Mentoring Program, was […]"

    Jennine Kimbal, Property Uplift Elite Mentoring Graduate

  • Michael Kuligowski

    "Hi, my name’s Michael, and I’m from New South Wales. Since joining the Elite Mentoring, we’ve been able to secure three properties. Well, under market value, both in inner Sydney, New South Wales, also regional new South Wales and one in Victoria by, undertaking, this program, we’ve definitely benefited, and we can see that we’re […]"

    Michael Kuligowski, Elite Mentoring Graduate (Property Uplift & Real Estate Rescue)

  • Sharon Harvey

    "Hi, I’m Sharon Harvey. I’m from South Australia. I joined the Elite Program because I was looking for something more in property and I was looking for more education and somebody who would inspire me and Dominique was that person. I listened to her talk and realize that there was a great synergy between us. […]"

    Sharon Harvey, Property Uplift Elite Mentoring Graduate

You May Also like to Read

Climate Change to Cost $25 billion in Damages to Australian Households

Is your suburb at risk of facing climate-related damages in the future?  Over the past twelve months, Australia’s...

What Are Asset Classes?

Knowing what the various asset classes are is a prerequisite for any budding investor or business owners. So, let’s take a...

Caveats On Property Explained

Often considered the “red flag” of real estate, here is everything you need to know about Caveats on properties.  A...

Australia’s About to Break This COVID-19 Record

Australia’s lauded COVID-19 strategy is wearing thin.  Australia has been the envy of the world for most of the...

Will Australia Go Into Another Recession?

With more than half of the country now in lockdown, the threat of another recession looms over Australia.  Prior to...

Sydney Lockdowns Extended: Here’s the Support Available

Sydney’s Lockdowns have been extended for a further 4 weeks - and that might be just the beginning. Here’s the support...