Deciding how your assets will be distributed after your death is one of the most important decisions you will make for your family. The right Will depends on your circumstances, your assets, and the people you want to provide for. Understanding the different types of Wills available can help you make an informed choice about which structure best protects what matters most to you.

In general terms, Wills can be grouped into three broad categories: simple Wills, complex Wills, and testamentary trust Wills. Each serves a different purpose, and choosing the right one depends on your family situation, the value and nature of your assets, and the outcomes you want to achieve.

Simple Wills

A simple Will is often suitable where your circumstances are relatively straightforward.

For example, you may be a married couple with a nuclear family whose assets are mainly made up of the family home and superannuation. You might want to make Wills that leave all of your assets to each other and appoint each other as executors, with your assets then divided equally amongst your children on the death of both of you. This is a fairly common, straightforward structure.

A simple Will typically works well where there is no blended family arrangement, no significant concern about how beneficiaries will manage their inheritance, and no complicating factors such as business interests or trust structures.

Complex Wills

A complex Will takes into account unique circumstances that might be somewhat out of the ordinary.

Blended Families

You may be in your second marriage and, while you have no children together, you each have children from a previous relationship. Perhaps you have not combined your assets, and on your deaths it is a priority for each of you to provide something to your respective children rather than leaving everything to each other.

In these situations, a complex Will might grant each spouse a right of occupation of the property you live in together and then direct that assets owned in your sole name pass to your respective children. This approach can help balance the needs of a surviving partner with the desire to preserve an inheritance for children from a previous relationship.

Providing for a Beneficiary With a Disability

Where you are providing for a beneficiary who has a disability, a standard Will may not be appropriate. Careful drafting is needed to ensure that the inheritance supports the beneficiary without jeopardising their access to government support or exposing the funds to mismanagement.

Estrangement and Family Disputes

A complex Will may also be suitable where you are navigating issues of estrangement with members of your family. Thoughtful drafting can help reduce the risk of disputes and provide a clear record of your intentions.

Testamentary Trust Wills

The third and most complex type of Will is a testamentary trust. Testamentary trusts are often suitable for people with significant assets, somewhat complicated circumstances, or both.

How a Testamentary Trust Works

In a testamentary trust structure, when you die your assets do not pass directly to your beneficiaries. Rather, they are transferred into a trust and managed by a trustee for the benefit of the beneficiaries of that trust.

For example, suppose you own five properties, have a million dollars in the bank, and hold a significant share portfolio that generates substantial dividends. You may have three children who you want to benefit from your assets, but you do not necessarily want them to receive their inheritance directly and immediately upon your death.

You can choose a person or people to be a trustee of your testamentary trust. When you die, rather than the properties, cash and shares being transferred to your three children, they are transferred to the trustees. Your Will then sets out the rules that the trustees have to follow in managing the assets.

Rules the Trustees May Need to Follow

The rules of the trust might include matters such as:

• A certain amount of money being set aside each year for education.
• Permission for the trustees to use trust assets or income to fund the purchase of real estate for beneficiaries.
• A direction that each beneficiary is to be paid a minimum sum of cash each year for their living expenses.
• A direction that the trustees can use the assets or income of the trust to pay for holidays and travel for the beneficiaries.

The rules can be tailored to reflect your wishes and your family’s circumstances.

Key Benefits of a Testamentary Trust

The main benefits of a testamentary trust are twofold.

Asset protection. As the assets of your estate do not pass directly to the beneficiaries, but are instead held on trust by the trustees, the assets of the trust are protected against situations such as an individual beneficiary becoming bankrupt or squandering their inheritance through poor financial management. There is also some protection in the context of relationship breakdowns. Assets of a testamentary trust will ordinarily not form part of the matrimonial pool of assets in the event that one of your beneficiaries goes through a marriage breakdown.

Potential tax minimisation. Much the same as an ordinary discretionary trust, a testamentary trust provides flexibility because the trustees can ordinarily determine how and to whom to distribute income. For example, the trustees may be able to distribute income to certain beneficiaries in favour of others if the tax outcome will be more advantageous. In the context of a testamentary trust, matters such as capital gains (for example, with respect to real property assets in the trust) can be distributed more flexibly, and there is an ability to distribute to minor beneficiaries without the penalty tax rates that usually apply to minors. We do not and cannot provide tax advice, and this is simply a basic snapshot of one of the perceived advantages of a testamentary trust.

Choosing the Right Will for Your Circumstances

There is no single Will structure that suits everyone. The right option depends on factors such as the nature and value of your assets, your family situation, the needs of your beneficiaries, and the outcomes you want to achieve. What looks like a simple estate on the surface can sometimes benefit from a more tailored approach, while in other cases a straightforward Will is perfectly adequate.

Taking the time to consider your options now can reduce uncertainty for your loved ones later and help ensure that your wishes are carried out as you intend.

Talk to Our Team About Your Will

Preparing a Will is one of the most meaningful ways to protect your family and your legacy. Whether your situation calls for a simple Will, a more tailored arrangement, or a testamentary trust structure, our team can help you understand your options and put a plan in place that reflects your wishes.

Contact our experienced team to discuss your situation and arrange a consultation.