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What Assets Can be Held in a Testamentary Trust?

Welcome to our blog post on testamentary trusts! If you're looking for information on how to protect your assets and ensure their smooth transfer after you pass away, then you've come to the right place.


A testamentary trust is a powerful estate planning tool that allows you to designate how your assets will be managed and distributed when you're no longer here.


In this article, we'll explore the various types of assets that can be held in a testamentary trust, giving you a comprehensive understanding of what options are available to secure your loved ones' financial future.


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Real Estate


Real estate is one of the most common types of assets that are placed in a testamentary trust. This includes properties such as houses, apartments, land, and commercial buildings.


Owning real estate can provide long-term value and generate income through rental payments or property appreciation. One benefit of placing real estate in a testamentary trust is that it allows for continued management and ownership after your passing.


The trustee becomes responsible for overseeing the property and ensuring any rental income or profits are distributed according to the terms outlined in the testamentary trust document. Additionally, holding real estate in a testamentary trust can provide added protection against potential creditors or legal challenges.


By leaving ownership to the trust and because it is a separate legal entity, it creates an additional layer of asset protection that can safeguard against claims made by individuals seeking compensation from loved ones directly.

Including real estate assets in a testamentary trust offers numerous advantages for both beneficiaries and grantors alike.


From preserving wealth to providing ongoing management support, this type of arrangement can help ensure your property is protected well into the future. However, you should also be mindful that various tax laws from state to state, and from country to country, may diminish or enhance the benefits of utilising a testamentary trust.


It is also important to note that managing real estate within a testamentary trust requires careful consideration and planning.


It may be necessary to consult with a lawyer or financial advisor who specialises in trusts to ensure all legal requirements are met and proper provisions are included within the document, along with appropriate consideration being given to taxation consequences.


Cash and Other Financial Assets


Cash and other financial assets are commonly held within a testamentary trust. When it comes to cash, this can include money in bank accounts, savings accounts, or even physical cash that is kept on hand.


These liquid assets can be easily transferred into the trust upon the passing of the testator. In addition to cash, other financial assets such as shares, certificates of deposit, money market accounts, and Treasury bills can also be held in a testamentary trust. These types of investments provide potential growth and income for beneficiaries over time. One benefit of holding cash and other financial assets in a testamentary trust is that it allows for professional management by a trustee who has experience in handling these types of investments.


This ensures that the funds are being managed effectively and responsibly by someone you trust and that has a degree of expertise that you are comfortable with. Furthermore, having these assets within a trust provides protection from creditors and potential legal disputes. By placing them under the control of a trustee, they become separate from your personal estate and may not be subject to certain taxes, claims or lawsuits. Including cash and other financial assets within a testamentary trust offers peace of mind knowing that your hard-earned money will be managed appropriately after your passing.


It provides an added layer of security for your loved ones while allowing for potential growth over time. However, it's important to carefully consider which stocks and bonds should be included in the trust.


Some investments may carry with them differing financial outcomes and it can be difficult to ensure parts of your estate are split equally to your beneficiaries where those investments are subject to fluctuation.


Stock investments in different countries may also have different tax consequences and therefore financial aspects should be considered carefully too.


Business Assets

When it comes to assets that can be held in a testamentary trust, business assets are also on the list. If you own a business and want to ensure its smooth transition after your passing, setting up a testamentary trust is an excellent option. Any tangible property related to your business falls under this category. This includes office buildings, warehouses, manufacturing equipment, vehicles, and even inventory. These physical assets are crucial for the continuation of your business operations. Additionally, intellectual property such as patents, trademarks, copyrights, and trade secrets can also be held within a testamentary trust. These intangible assets often hold significant value for businesses in today's knowledge-based economy. Moreover, financial instruments like stocks and bonds owned by the business can also be included in the trust. These investments not only contribute to the overall value of the company but also provide potential income for beneficiaries. Lastly, some contracts may be assignable and/or apply to your successors and assigns. This means some contracts with suppliers or clients that generate recurring revenue streams for your business could be transitions to ownership of the trust following your passing.


By including these contractual agreements in a testamentary trust ensures their continuity even after you're no longer able to oversee them personally.


When dealing with business assets though, you should be mindful of any taxation laws and also the needs of your other business partners.


When planning use of a testamentary trust, you need to ensure that you consider any agreements you may already have in place with your business partners (such as a shareholder/partnership agreement) which may override your intended outcome.


It is usually a sound idea to seek financial and legal advice when utilising a testamentary trust will, particularly for business assets.


Collectibles and Personal Property

A testamentary trust can also hold a variety of collectibles and personal property. These assets may have sentimental value or be considered valuable in the marketplace.


From artwork and jewellery to antique furniture and rare coins, these items can be protected and managed through a testamentary trust.

Antique furniture adds character to any home, but it also has monetary value that should be protected. Rare coins are not only fascinating from a historical perspective but can also appreciate over time.


Collector edition items and those items bearing autographs of famous peoples can gain significant value with the passage of time. Artwork and jewellery are often treasured for their beauty but can also have investment potential.


Holding these pieces in a testamentary trust can help ensure they also benefit from the protections mentioned above so that they are safeguarded for future generations to enjoy. When creating a testamentary trust, consider the need for management of these items and the actuality or likelihood that they are or may become valuable.


Even if they are not valuable or do not become valuable, leaving them to your beneficial within a testamentary trust may at least offer some protection from personal claims against them that would otherwise see them having to sell the items to satisfy the claim.


Conclusion

A will which establishes a testamentary trust is a versatile and powerful tool for estate planning.


It allows individuals to distribute their assets according to their wishes after they pass away while adding a layer of protection from a myriad of circumstances that may otherwise place them at risk.


By creating a testamentary trust, you can provide for your loved ones, efficiently navigate tax liabilities, and provide meaningful direction to your family about how your assets are managed after you pass away. The types of assets that can be held in a testamentary trust are diverse and include real estate properties, cash and financial assets, business assets, stocks and bonds, as well as collectibles and personal property.


Each asset type has its own unique considerations when it comes to managing them within a trust structure. When establishing a testamentary trust or considering the inclusion of specific assets within it, it is crucial to consult with an experienced solicitor who can guide you through the legal requirements and ensure that your intentions are properly documented.


Remember that every individual's situation is unique, so it is important to tailor your will and testamentary trust terms accordingly.


By working with professionals who specialise in estate planning strategies, including financial planners and accountants, you can create a comprehensive plan that protects your legacy while providing for the future needs of your beneficiaries.

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