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What’s better for me, a simple Will or a “TDT” (Testamentary Discretionary Trust)?

Whether a normal Will or a TDT Will might be better for you is a spectrum. On one end you have a simple situation / Will which gives most of the Estate away relatively quickly and hardly requires the trustee role and on the other end of that spectrum you may have young children and/or a large asset rich or business portfolio which would benefit from having the trust terms set out very carefully to avoid misunderstandings and to make sure that the intentions of the Will maker can be carried out.

Here are some of the relevant factors about whether a TDT Will might make sense:

  1. TimeframeThe estate will be managed for a long time, for example if the Will maker passes away unexpectedly early / with younger children.
  2. Assets Significant asset pool / business assets. A TDT Will makes sense if there are larger assets, benefits to a good tax environment and a longer timeframe required to manage capital / assets.
  3. Clarity If the Will maker would like their Executors / Trustees to have a clear roadmap and boundaries rather than an open slate to figure out as they go.
  4. Issues If children have substance abuse / spending / relationship issues.
  5. Changes Instead of making a lot of ‘control’ type changes to a standard Will, including adding complex trust requirements, it may be more cost-effective to just start with a TDT Will.
  6. Control Will maker wants significant control over assets and time.

Although we can’t offer tax or financial planning advice, we understand that a TDT Will may provide potential tax benefits. If there are multiple children you can set up multiple trusts in the TDT Will or a single trust if you prefer.

Set up Although a TDT is generally created when the Will maker passes away, couples may set up their TDT(s) in a few different ways (see three example situations). 1. TDT only created after last person standing passes away. 2. TDT created if person responsible for finances passes away first and when survivor passes away, their assets go to the established TDT (otherwise when the last person standing passes away). 3. TDT created when first person passes away and another created when the second person passes away. There are plenty of options depending on your situation.

Although trusts in normal Wills are (generally) governed pursuant to the Trusts Act 1973, the trust deed embedded in a TDT will often set out further information (as decided by the testator) like:

  1. Specify Appointor function and replacement process (Appointor role is generally to hire and fire Trustees)
  2. Nominate Trustee(s)
  3. Specifies how Trustees are to deal with capital and income.
  4. Powers of trustees (perhaps amending those in the Trusts Act 1973.
  5. Accounting information (periods, who gets money by default if not disbursed etc)
  6. Sets out normal provisions of a trust deed (including trustee powers) eg to lend money, mortgage property, occupy trust property etc. Reach out to start working with us now

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