Why upgrade to a Smarter Will?
Will Genie Offers Smarter Wills
The only online Will platform that offers Smarter Wills with extra asset protection & advanced tax minimisation.
What is a “Smarter” Will?
Smarter Wills are a premium solution that let you include a special, advanced mechanism in your Will called “testamentary discretionary trusts”. This gives your beneficiaries (ie, the people receiving gifts in your Will) the option to receive those gifts in a trust, rather than directly. Although these trusts add complexity, they also add asset protection and a lot of flexibility, particularly when it comes to tax, so they are generally recommended.
Here are the 2 biggest reasons why you should upgrade today:
Asset Protection
With a Standard Will, the assets pass to the beneficiaries directly. This means that the assets are at risk:
- Bankruptcy – Assets held in your beneficiary’s own name are vulnerable to claims from their creditors. For example, if the beneficiary makes an investment that goes bad, or someone has an accident for which the beneficiary is held liable, then your hard-earned assets may be used to pay those debts.
- Family Law claims – If your beneficiary is involved in a marriage or de facto relationship that breaks down, their former partner may make claims against their assets. The Family Court of Australia has broad powers to divide a beneficiary’s property between the partners and require the payment of maintenance (ie, alimony). Placing your assets in a ‘testamentary discretionary trust’ may help to insulate your hard-earned assets from such claims. These trusts are only available with Smarter Wills.
Tax Minimisation
With a Standard Will, income from the estate assets – eg, rent from an investment property, and capital gains when it’s sold – will be added to the beneficiary’s taxable income. If they already earn a salary, the income will be taxed at high marginal rates. Smarter Wills use clever trust structures called ‘testamentary discretionary trusts’, which enable income from the estate assets to be ‘streamed’ to family members on low or no incomes (eg, stay-at-home parents, adult students and even minor children). With these special trusts, children are taxed like adults with the same tax-free threshold and marginal rates, which means that your family can save a lot of unnecessary tax.
Easy Example:
In this diagram, Jane and John leave an apartment to their daughter, Mary, which generates $40k of rental income per year. Mary has a job that earns her a $120k salary. Without a testamentary discretionary trust, her taxable income becomes $160k, meaning that Mary will pay tax of 37% on the additional $40k of income.
With a testamentary discretionary trust, Mary can ‘stream’ the additional $40k between her two children, Katherine and Todd. Katherine and Todd are children who otherwise earn no income but who, because of this clever trust structure, are taxed as adults with a tax-free threshold of $18k, so almost all of the $40k is then tax-free.
What Lawyers Say About This
“The old, so-called ‘simple’ will does NOT avoid complications – in fact, it does the opposite, by preventing flexibility and leaving gaping holes for tax leakage. They’re generally poorly drafted with little or no thought given to protecting beneficiaries and tax minimisation.”
“Testamentary Discretionary Trusts (TDTs) are a valuable estate planning tool used to maximise flexibility, protect beneficiaries and minimise tax implications. One of the major benefits of a TDT Will is asset protection. Assets held in a well-drafted TDT can be protected from external creditors, as the money is held to be owned by the trust and not the beneficiary. Similarly, assets cannot be accessed in the case of a marriage or relationship breakdown, although they may be considered as a financial resource by the courts … TDTs also offer tax advantages in many circumstances … Depending on your circumstances and the value of your estate, a TDT can result in thousands of dollars in tax savings for beneficiaries and their families every year.”
“There are many structural benefits associated with Testamentary Discretionary Trusts including asset protection and taxation. The Trust assets are … not generally available to the Trustee in Bankruptcy for payment of creditors. The assets of the Trust are unlikely to be regarded as property of any of the beneficiaries for family law purposes … Each of the children would have the ability to share the income from the investment of the Trust capital with the other beneficiaries of his or her Trust, thus minimising the income tax on that income.”