Do you require a discretionary testamentary trust in your Will?
Please note our standard Wills include a trust for your minor children until they reach a nominated age and allows for provision throughout their childhood. The trust ends when they reach the nominated age and they then receive their share of their inheritance (less what has already been advanced to them throughout their childhood). In contrast, a discretionary testamentary trust (DTT) would continue beyond this age.
- your estate (excluding jointly owned real estate) will be substantial; and
- in the ordinary course, you would leave all or most of your estate to an adult beneficiary who has children under 18; and
- there is a reasonable possibility of that beneficiary investing the gift they receive to earn income over a period (rather than spending it on non-income producing assets - such as a house to live in - or to pay down debt),
then you should consider including a DTT in your Will.
Other reasons to include a DTT include:
- disabled beneficiaries
- beneficiaries who are bad with money (eg because of gambling or drugs)
- beneficiaries who need protection from creditors, litigants or the Family Court.
Disadvantages of a DTT:
administration involved, both in terms of time and cost. A DTT might last for many years. The trustee will have to keep proper accounts for the trust and file tax returns every year.
Can be more susceptible to challenge under family provision laws (eg if you have kids from another relationship).
Not necessary if the money would be spent on your home or if there is no one to distribute the income to.
If you aren’t sure if you want a DTT, please email us beforehand, or speak to your financial planner/accountant.