Could you use a Testamentary Trust to reduce tax for your kids? Many people don't think about it!

Financial Planner Luke Smith joined 2CC Talking Canberra 1206AM in Money Matters, which aired live on Friday 12 July 2024. This week’s show looks at an important estate planning issue, and one that’s very important for those with people who have minors or those under 18 in their lives. This week Luke explores Testamentary Trusts, what they are, and why you might consider them as part of your own financial planning strategy when it comes to planning your estate. Thank you for joining us live on 2CC or your favourite podcast streaming service with ‘The Strategy Stacker - Luke Talks Money’.
Key topics covered include:
- What is a Testamentary Trust?
- The Will must allow for the use of this vehicle, so it must be written into a Will.
- What are the benefits of a testamentary trust from a tax perspective?
- What about the benefit of asset protection?
- What about superannuation, your Will and a testamentary trust? Can you direct your super to your Will?
- Don’t forget about the complexities of blended families or minors who might not make great decisions.
- What are the differences between family trusts and testamentary trusts?
- Luke shares his top tips around testamentary trusts. Seek advice if you need help.
Are your estate plans in order for your kids or grandkids?
Luke as a Financial Planner can help you set up a financial planning strategy to help you achieve your personal financial goals, including investment, super and retirement. Make an appointment to confidentially discuss your goals. Call Envision Financial Services on 6260 4749. You can use the contact us form to make an appointment, for a confidential discussion about your situation. Luke can also refer you to a family lawyer who can work with you to meet your estate planning needs. He can also discuss with you how your superannuation estate planning works.
We look forward to your company again and Luke’s book Smart Money Strategy is out now. For more information visit: thestrategystacker.com.au/
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What to hear about a specific financial planning topic?
Ask Luke your question here: thestrategystacker.com.au/ask-luke

[@neolion8150]

Doing this for the algorithm because you can’t find these topics done so well anywhere else.

[@thestrategystacker]

Thankyou. If only I knew how to get this to 1m people quickly everyone would be better off.

[@tomaraquefalls]

Content is gold👍 You are getting the message out, it is so important in many ways. It is not a topic that attracts the attention as '$1m is yours in 22 seconds' but you are doing your bit in sharing wisdom. 'If you want to protect your kids'. A most powerful message to any parent. That is our job.👍👍

[@BeeMcDee]

So, if there are multiple children in a testamentary trust, and they want to sell the assets I.e. property, can they do that? And if the beneficiaries never actually own the assets, what happens if/when they die? Also, is there any info you can give about the process of accessing those assets? Does it differ between trusts? E.g. how does a mechanism like a testamentary trust allow beneficiaries to withdraw money/assets and also protect against financial abuse/control by the trustee?

[@thestrategystacker]

@@BeeMcDee they can sell anything they want at any time. The trust simply holds the asset for their benefit. It would also pass on their death per their estate planning documentation that would allow for the assets in the trust. Professional advice is essential with this regard.

[@RennieCacciola]

If a couple has an SMSF with a property being the biggest asset, how can the adult children be shielded from taxation on the death of both parents? Would it be better to divest the property when both are retired, take the lump sum, and then re-contribute into accumulation? Or would the testamentary trust help avoid tax for adult children?

[@thestrategystacker]

@@RennieCacciola tax status moves with the cash. You could sell and re cont or sell and take out prior to passing. Or start multiple account based pensions with cash in the fund if your pension age and hold the property at the same time.