COMPLEX FINANCIAL AND FAMILY AFFAIRS WITH HIGH NET WORTH
A “complex will” differs to a “simple will” as it takes into consideration additional assets or circumstances that may apply to a person, such as a business or company, care of children and contingencies should unforeseen circumstances arise when you pass away.
A complex will can be beneficial where a person has complex financial and family affairs and/or a high net worth but want to ensure that their estate is administered in a manner that benefits their beneficiaries upon their passing with the least amount of tax burden.
Testamentary discretionary trusts
Often, a complex will includes the creation of a testamentary trust. The testamentary trust is a discretionary trust which provides the trustee with full discretion as to who benefits under the trust and to what extent they benefit.
There are several key benefits of creating a testamentary trust, including:
Assets can be purchased under the testamentary trust. By doing so, this ensures that the assets remain within the family, as intended, and can be used to benefit family members. A testamentary trust also provides the control to the trustee to ensure that a beneficiary does not misuse the assets within the trust.
For your beneficiaries, this provides them with a form of protection if they were to fall into a situation where their assets would be at risk as the assets are not in their personal names.
Situations where a beneficiary would be at risk can include:
- Marital and/or relationship breakdowns and property settlement;
- Bankruptcy (particularly those involved in highly leveraged businesses); and/or
- Their children inappropriately managing or wasting their inheritance
Significant tax advantages are available for testamentary trusts.
- The removal of punitive tax rates of unearned income (e.g. investment dividends, interest, etc) for children – that is, ordinary tax rates will apply where the income is distributed from a trust estate created under a Will
- Distribution of income gains, capital gains and franked dividends earned from the estate assets amongst family beneficiaries annually in a tax-efficient method
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