Simple Wills v Testamentary Trust Wills: What is the difference?
Deciding between a "Simple Will" and a "Testamentary Trust Will" can be challenging! Each type of will serves different needs, depending on your personal and financial circumstances.
Simple Wills
A Simple Will is a concise document, typically between 1 and 10 pages, that appoints an executor and outlines straightforward instructions for distributing your estate. The usual distribution under a Simple Will might look like this:
Your remaining assets (after debts, expenses, and specific gifts are accounted for) pass to a primary beneficiary (e.g., spouse or partner).
If the primary beneficiary does not survive you, your assets pass to alternate beneficiaries (e.g., children) in equal shares.
If neither the primary beneficiary nor alternate beneficiaries (e.g., children) survive you, the estate may pass to other descendants, such as grandchildren.
A Simple Will may be suitable if:
You have a relatively modest estate with minimal complexity.
You want to ensure assets pass to specific beneficiaries without additional conditions.
Complex family dynamics or disputes are not anticipated.
Tax efficiency or asset protection is not a primary concern.
Limitations: Simple Wills generally do not offer significant asset protection, creditor protection, or tax benefits.
Please note: The above points are examples of what a Simple Will might contain, but individual circumstances may differ. Simple Wills offered by Estate Essentials are customisable to some extent; however, they do not provide advanced tax or asset protection strategies.
To learn more about our ‘Core Will’ (our version of a Simple Will) click here.
Testamentary Trust Wills
If you anticipate circumstances such as potential challenges to your Will, complex family arrangements, or a need for tax and asset protection, a Testamentary Trust Will may be more suitable.
A Testamentary Trust Will is a more detailed document, typically between 10 and 40 pages, that creates one or more discretionary trusts upon your passing. These trusts are managed by a trustee (who may or may not be the executor). While the trustee legally owns the trust assets, they are held for the benefit of named beneficiaries. Unlike family trusts established during a person’s lifetime, testamentary trusts are only activated upon death.
Potential Benefits of a Testamentary Trust Will
Asset Protection: Helps safeguard assets from divorce, relationship breakdowns, or vulnerable beneficiaries (e.g., minors, individuals with disabilities, or spendthrift tendencies).
Creditor Protection: Protects assets from legal or financial risks faced by beneficiaries (e.g., bankruptcy).
Pension Protection: Can assist in preserving beneficiaries’ pension entitlements.
Income Splitting: Allows income to be distributed to family members on lower tax rates.
Tax Benefits for Minors: Enables children under 18 to receive trust income tax-free (up to a threshold, subject to applicable tax laws).
Flexibility: Trustees can adapt asset management to suit the changing needs of beneficiaries.
Note: The extent of these benefits depends on your individual circumstances and how the Testamentary Trust Will is drafted. Professional advice is strongly recommended.
Need Help Deciding?
If you are unsure which type of will suits your circumstances, we recommend consulting a qualified lawyer, especially one specialising in Wills and Estates. A professional can assess the size of your estate, family dynamics, and other relevant factors to help you make an informed decision.
Disclaimer: The information provided in this article is general in nature and does not constitute legal advice. Estate Essentials is not a law firm and does not provide legal services. While we strive to provide accurate and up-to-date information, it may not apply to your specific circumstances or address all potential issues. We strongly recommend consulting an independent legal professional to ensure your estate planning documents meet your unique requirements.