Income splitting

Income can be split between beneficiaries, thereby taking advantage of beneficiaries with lower marginal tax rates. Beneficiaries who are under the age of 18 years are taxed as adults, so their tax-free threshold is $18,200.

Income streaming

Different classes of income can be allocated to different beneficiaries, e.g. capital gains to ‘ A’ (low income) and fully franked dividends to ‘B’.

Asset protection in the event of divorce or separation

A spouse may not be able to claim that the trust assets form part of the matrimonial property (the Court will consider who has control of the trust), although the trust may be treated as a resource available to the spouse.

Asset protection from creditors or potential bankruptcy

The beneficiaries do not own the trust assets and have no entitlement to trust property unless or until the trustee determines, therefore the trust assets are not available to beneficiaries’ creditors.

Deferral of beneficiary control

The Will-maker can defer control of inheritance either for a period of time or indefinitely, while still benefitting the beneficiaries. This is particularly attractive in the case of beneficiaries who are immature or who have gambling, drug, alcohol or other problems.

Flexibility

With optional or opt-in trusts, beneficiaries can choose whether to establish a trust or take inheritance outright.

For tailored advice on how testamentary trusts can be used in your estate plan, contact us for an estate planning consultation.