Is a Testamentary Trust Different from a Family Trust?
Yes. Although both testamentary and family trusts have similar features, such as the ability of the trustee to decide which beneficiaries of the trust will receive income, there are considerable taxation advantages for minor beneficiaries (those under the age of 18 years) under a testamentary trust. Income received by minor beneficiaries from a family trust will be subject to penalty tax rates should that income exceed in the vicinity of $1,100. Under a testamentary trust, minor beneficiaries receive the full tax income threshold of $6,000 tax-free, which means that up to $10,000 a year (utilising the low-income tax-offset) can be allocated to each child under the age of 18 tax-free each year, with amounts over that amount being taxed at normal adult rates. Because of the uncertainty as to whether the Federal Government will tax trusts in the future, it is advisable that testamentary trusts be incorporated in a will as an option that can be triggered as circumstances dictate. Even if t
