Testamentary trusts
A testamentary trust created through your Will enables you to provide your beneficiaries with income tax advantages they wouldn’t receive with an outright inheritance.
Testamentary Trusts
A testamentary trust created through your Will enables you to provide your beneficiaries with income tax advantages they wouldn’t receive with an outright inheritance. The income your beneficiaries earn from a testamentary trust is taxed on a separate tax return at graduated tax rates. On the other hand, the income from an outright inheritance is taxed as part of their regular income, potentially bumping them to a higher tax rate, which can result in less after-tax income.
In addition to the potential tax advantages, there are other reasons to consider a testamentary trust. For example, you may set up a testamentary trust for a disabled family member or minor child specifying certain conditions, or to ensure children from a previous marriage receive their inheritances.