If somebody in your family has had the foresight to establish a testamentary trust in their will, the storey has only just started. The tax management of a testamentary trust requires planning that ensures that the trust operates as intended. From an income tax perspective, a testamentary trust offers significant tax advantages. If properly managed, a testamentary trust can distribute profits to a child, and those profits can be taxed at adult tax rates compared to the highest tax rate.

So, if your testamentary trust generated profits of $45,000 and distributed this profit to two children, the children would not incur tax. However, the same profits to a high-income earner would incur a tax of $21,150. However, these tax advantages need careful engagement with the ATO for ongoing tax compliance through tax return preparation. Testamentary trusts can simplify this process by using cloud accounting software like Xero and supporting the Xero file with software add-ons like Hubdoc.

The deep tax knowledge at Westcourt, which our tax leadership can demonstrate, allows families to leverage our expertise into tax opportunities. The active engagement of our team with your deceased estate allows opportunities such as events for when children reach maturity, allocating profits to both adults and children and reinvestment within the testamentary trust.

A testamentary trust is a simple investment vehicle that a licensed investment advisor assists in most instances. And the collaboration of the investment advisor’s transactions into our software to report to banks and the ATO is important to simplify the administration of testamentary trusts and reduce the ongoing costs and expenses of maintaining these entities.

Many people retain and operate their testamentary trusts for asset protection reasons.  Our bookkeeping and processing team are diligent and consistent when processing payments and managing the diverse needs of different family members.