Why you do NOT need a Testamentary Trust Will (Will creating Asset Protection Trusts)
The simple answer is that when you die your worries will be over. Wills creating Asset Protection Trusts (also known as Testamentary Trusts) only benefit a person’s intended beneficiaries. However, if it is your intention to leave your assets to your intended beneficiaries in the most advantageous manner for them upon your debt then you should consider whether a Will creating Asset Protection Trust is appropriate for your beneficiaries.
Typically, Asset Protection Trusts benefit most these beneficiaries who are at risk persons such as professionals, business owners and property investors and/or beneficiaries whose existing incomes are such that any additional income derived from investment of an inheritance would be taxed at the highest marginal rate.
However, you might also consider the following two (2) recent real circumstances when deciding whether a Will creating an Asset Protection Trusts is appropriate for your beneficiaries.
Example One (Undischarged Bankrupt):
I recently received an enquiry from a person who had been discharged from bankruptcy for approximately three (3) months. Unfortunately, his father had passed away two (2) weeks before his bankruptcy expired. He was contacting me because the Trustee in Bankruptcy had learned of the inheritance which, because his father’s Will did not create an Asset Proctection Trust, left a share of his Estate to the person absolutely.
The result was that the inheritance was an Asset of the Bankrupt Estate and the person was not entitled to any part of it.
Example Two (Costs Order):
I received another enquiry recently from a person who 12 months earlier had had a large personal Costs Order made against him in respect of Civil Court Proceedings in which he was unsuccessful (Roberts Legal did not act in relation to those proceedings). His father had recently passed away without a Will. Under the rules of intestacy the person’s mother-in-law stood to inherit the whole of the Estate. The person’s siblings intended to bring a claim for provision from the Estate which was likely to be successful and result in the person receiving some inheritance.
Unfortunately, the persons in who’s favour the Costs Order had been made were aware of the circumstances and had already indicated to the person that when the inheritance was received they intended to enforce their Costs Order. The effect of this would be that the whole of the person’s inheritance would be lost.
See also our Case Study: Sophie’s Lost Inheritance.
In both of the above examples the persons who stood to miss out on their inheritance were neither professionals, business owners or at risk persons. The unfortunate reality for every person making a Will is that it is their beneficiary’s circumstances that are more relevant to whether the Will should create Asseet Protection Trusts and, in most cases, those furture circumstances cannot be anticipated with any real certainty.