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Testamentary Trusts & reducing CGT impact |
Although death duties were last heard of in Australia many years ago, more people than ever are today planning their estates to avoid the impost of a tax on death. The difference between effective and poor planning could cost your family tens of thousands of dollars in their inheritance. Yet the solutions are easy to implement.
What you are really trying to stop is capital gains tax being paid at the date of death. The other thing to do is plan to minimise tax. 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.
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