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Securing Your Legacy

Harnessing the Power of a Testamentary Discretionary Trust 

for Intergenerational Wealth Transfer

As you reach the later stages of life and see grown-up children building their own lives, it’s common to reflect on the legacy you will leave behind for our loved ones. 

 A testamentary discretionary trust (“TDT”) is a powerful tool that can play a significant role in preserving and transferring your hard-earned wealth to future generations. In this blog we guide you through the workings of a TDT and how it can be utilized as a powerful strategy in your estate plan.

Understanding a Testamentary Discretionary Trust

 

A TDT is a trust established through your Will that comes into effect on your death. It provides a framework for the distribution and management of your assets and income generated by your assets, granting powers to your chosen trustee(s) to determine how and when distributions are made to your chosen beneficiaries (usually your children and grandchildren, but this can be modified to suit your particular circumstances). 

This unique feature of discretion allows the trustee to adapt to changing circumstances, protect assets, and ensure the financial well-being of your loved ones.

Preserving Assets and Minimizing Risks

One of the primary benefits of a TDT is asset protection. 

 By holding your assets in the TDT, there is an additional layer of protection from potential risks, such as relationship breakdown, financial mismanagement, or high risk occupations. This is subject to the structuring of the TDT and view of the Court. If properly drafted and utilised, the TDT may act as a safeguard, ensuring that your wealth remains intact and is prudently managed for the benefit of your chosen loved ones.

Flexibility and Control

A TDT provides flexibility to control the distribution of income and assets. 

Through the discretionary powers granted to the trustee, the trustee can distribute based on the unique circumstances and needs of your beneficiaries. This flexibility allows for adjustments in response to changes in financial situations, varying needs, and the growth of your family over time.

Tax Efficiency and Wealth Transfer

Utilising a TDT can also offer significant tax efficiency. 

By distributing income among beneficiaries on lower tax brackets or who have more favourable tax positions, the trustee may potentially minimise the overall tax liability on the trust’s income. This strategic tax planning enhances the long-term growth and preservation of your wealth, ensuring a more efficient transfer of assets to future generations.

Beneficiaries of the trust under 18 years of age may receive approximately $20,000 tax free income from the trust per year AND this lasts for the life of the trust – meaning potentially great-grandchildren may benefit.

Establishing a Lasting Legacy

By incorporating a TDT into your estate plan, you have the opportunity to create a lasting legacy for your family. 

This trust structure enables the preservation and growth of assets for the benefit of multiple generations. You can instill important values, provide educational support, and ensure the financial well-being of your descendants, fostering a sense of security and opportunity that extends beyond your lifetime.

Ready to get your estate plan sorted? Head to ‘request a booking‘ to get started now. 

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"How Does a Testamentary Discretionary Trust Work?" resource download link

A testamentary discretionary trust is a trust that is established by a Will. This flyer explains how a testamentary discretionary trust works and why it can be a powerful strategy in your estate plan.

The information in this download is general information only and not legal advice.

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