Once you become a parent there is a never-ending strive to become a better parent. The fear that you won’t be able to provide for them or protect them.
Trusts can reduce parenting anxiety and make you and your family feel safe.
Providing for your loved ones is what many parents feel is their duty. And many are smart enough to do it with an early will – the earlier you prepare your will, the more years you can live knowing that your children are protected whatever happens.
One of the ways parents choose to protect their children through their wills is to establish a testamentary trust. This is a better choice when there are small children involved that won’t be able to manage their inheritance or where the guardian won’t be able to manage the financial dealing of the child.
Testamentary trust is also a useful tool to protect your assets from claims by spouses or partners if any of your children are involved in a matrimonial property dispute.
A testamentary trust is a trust that takes effect only when you and your spouse both die. It is a trust that is established through your will. Usually, parents will have a trustee that will be responsible for managing the trust.
This can be your lawyer or another person that is qualified for managing financial assets.
Testamentary trusts are very flexible and allow you to take decisions about the financial future of your children.
It is also advisable to establish a testamentary trust where your children are the beneficiaries and your spouse is the trustee so that your family can enjoy tax deductions and have more disposable income to cover education and livelihood expenses.
Parenting is not only about providing but also teaching children right from wrong, and responsibility, especially financial. A testamentary trust gives you the following options to achieve better parenting even if you and your spouse are long gone:
- make the trust always available for certain kinds of expenses like medical or education
- re-invest part of the interest in a university fund or wedding savings account
- list certain activities that will always be paid for by the trust
- set a monthly allowance
- set how much would be spend on different things such as entertainment, travel and property
- reduce taxes, fees and other financial responsibility requirements for your spouse and children
- choose who will be the trust beneficiary – your spouse or children
When you create a testamentary trust it is always established through your will.
In other words, if your will is challenged and deemed invalid or some parts drafted improperly, the provisions in the testamentary trust might be cancelled and the whole inheritance will be released to the child’s guardian.
This simply means that you need to make sure that your family lawyer has extensive experience in dealing with wills and trusts so that you’re sure your will is top notch.
The lives and livelihoods of your family and children in the future might depend on the decisions you take today. Establishing a testamentary trust is not preparing to die, but preparing to be a good parent even after you are not around. With a testamentary trust you provide more available income due to tax deductions for your children as beneficiaries and your spouse as trustee as compared to only having a will that leaves your assets to your family.
It’s never really too early to set up a testamentary trust for your children as it’s never too early to be a good parent. Make sure you consult a lawyer experienced in setting up trusts and deep family values and law understanding to make sure you are taking the best decisions for your children.
As always seek professional advice for your personal situation.
Have you had experience setting up a testamentary trust? Please share your experience in the comments below.