I recently took instructions from a couple with children who are primary school and kindy age and discussed, as would normally be the case, their assets and liabilities. At the beginning of our conference the couple remarked that they didn’t really have anything to leave to their children.  By the end of their conference they understood that in fact their children stood to inherit a seven-figure sum when their superannuation and attached life insurance was taken into account.

Their immediate concern was who would look after such a sum that in the event they passed away prior to their children attaining the age of 18 and even then, whether or not their children should have access to a seven-figure sum at the tender age of 18. Testamentary guardians were appointed, those being trustworthy members of my clients’ families. Those testamentary guardians were also appointed as the trustees of testamentary trusts which were established for the benefit of each of their children and their family groups. Of particular concern to the clients was potential family law actions against their children, should they marry the wrong person (although it will be love at first sight of course!).

The testamentary discretionary trusts were crafted in such a way that maximum protection was given to those children should they marry and find themselves embroiled in family law proceedings, so that the testamentary discretionary trust might be included as a financial resource of that child in those proceedings but would not likely form part of the matrimonial pool of assets. The ability to create a Superannuation Proceeds Trust was also included along with provision for a Special Disability Trust if required. An equalisation clause was also included to make sure that estate and non-estate assets could be evened up (if required).

By instructing to have their Will drawn in this fashion my clients have given their children maximum flexibility to manage any tax consequences as a result of their death and the ability to protect their inheritance.

The testamentary trusts also have the taxation advantages as a result of the exceptions found in Section 102AG of the Income Tax Assessment Act 1997 (Cth), which I have written about in other articles which can be found on our website www.cookehutchinson.com.au

Until next time,

Dan Hutchinson

 

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