Testamentary Trust

• Is a WILL sufficient to meet all your concerns to protect your assets?
• What happens to your estate when your children are still minors?
• If both spouses die unexpectedly, what happens to sizeable insurance proceeds?
• What about an 18-year-old kid getting several hundred thousand ringgits of insurance proceeds at age 18? Is it possible your children will be more mature?
• Can distribution of assets be delayed until the beneficiaries reach certain ages?
• What about distributing half of the child’s share at age 25 with the remainder at age 30?

With Testamentary Trusts, such results are possible.

Testamentary Trust is a Trust in a Will

Testamentary Trust provisions are often designed primarily to prevent large sums of money from being distributed to young adults if both parents are deceased. For eg, A Will with a Trust may provide that if there is no surviving spouse, then all of the assets will go to a designated Trustee Corporation to be held until the children reach certain ages.

Like all other trusts, a testamentary trust creates a legal relationship between the settlor of the trust (in this case the deceased person or the "testator"), the trustee and the beneficiaries of the trust. The terms of the trust can provide for the payment of income or capital or both to the beneficiaries. Either the interests of all beneficiaries can be fixed in the will or discretion to allocate the income and/or capital among the beneficiaries can be left to the trustee.

Although the beneficiaries of the trust have an interest in it, the trustee is the legal owner of the property held in the trust and has the authority to control the management of the assets. The trustee’s obligations include making decisions about the investment of the trust assets and preparing and filing tax returns on behalf of the trust. It is possible to establish multiple testamentary trusts in a will.

Depending on the terms of the trust, beneficiaries of testamentary trusts typically have no right to demand that the assets of the trust be conveyed to them before the end of the trust. As such, testamentary trust assets are free from the claims of beneficiaries’ creditors, including both commercial creditors, such as bank lenders, and also family creditors, such as spouses. The trust structure can also provide protection for a spendthrift beneficiary. In this way, testamentary trusts can be a good tool to ensure an estate passes only to the intended beneficiaries.

A testamentary trust can make funds available to finance a child’s needs in case of death of both parents. The trustee manages the assets in the trust for the benefit of the child and distributes the income and capital to the child at the terms stated by you and trustee’s discretion. The terms of the trust can provide discretion to the trustee to give reasonable amount according to the needs of the child as he/she growing up.