Estate Planning


Testamentary trusts

Reduction in tax example

However, if your uncle left his assets to you by way of a testamentary trust with your family as beneficiaries, the $2.5 million in the trust could be invested and the earnings distributed equally to your spouse and two children.

In this case, no tax would be payable on the earnings as each person receives $16,667 which is within the tax-free threshold.  

Therefore, by using a testamentary trust, the family would save tax of $23,500 for each year. Pending the ages of the children and their subsequent income once an adult, over a ten year period, that is as much as $235,000 which could generate more returns and preserve the original capital value for a longer period.