This has the effect of providing for a flexible structure for both parents and surviving Beneficiaries.  If you are restructuring your affairs and transferring assets to a discretionary trust then careful attention must be given to who will control the trust upon your death.  Three main areas that are often neglected include:-

• Executing a Will and making no provision for assets held by your discretionary trust.
• The Will leaves total control of their discretionary trust to one beneficiary who under the powers of the deed distributes all the trust property to him/herself.
• Provision is made for the discretionary trust, however you neglect outstanding loan and beneficiary accounts and these destroy your intentions.

Testamentary Trusts are one of the greatest planning tools available to every taxpayer and their advantages far exceed the tax relief and include:-

• Protection of pension entitlements for surviving spouses and Beneficiaries.
• Income tax advantages to Beneficiaries of a Will.
• Capital gains tax advantages to Beneficiaries of a Will.
• Protection of Beneficiaries against creditors and bankruptcy.
• Control of assets against spendthrift Beneficiaries.

The main benefits of a testamentary trust fall under Part III Division 6AA of the Income Tax Assessment Act 1936 whereby assessable income of a trust estate is accepted trust income and therefore those amounts distributed to minors are not subject to the penal rates.  That is, a capital gain of a certain sum distributed to a minor from a Testamentary Trust would be subject to no tax as a result of the averaging provisions that apply to capital gains.