Testamentary trusts 043-04110040

The assessment of a customer's income and assets in relation to a testamentary trust depends on whether the customer has a:

• right to a devise (freehold land) or a legacy for the estate
• life interest in the estate
• remainder interest or contingent interest in the estate

Any share in a deceased estate is disregarded until it is received or is able to be received. For a period of up to 12 months following the death of the testator (the maker of the will) it will be accepted that an interest in an estate which has not been distributed is not able to be received. After this period investigation into the reasons for non-distribution will be carried out. If there is no legal action preventing the distribution of the estate then the customer's share of the estate should be assessed.

• Where a fixed testamentary trust is activated on or before 31 March 2001, the practice of assessing the asset value based on the fixed entitlements of the beneficiaries and the income on actual distributions to beneficiaries will continue. However, the rules for attribution will apply, if after 31 March 2001 a customer:
• transfers additional assets or funds to the trust
• provides services to the trust, or
• alters the entitlements of trust beneficiaries, for their own benefit or otherwise
• Where a discretionary testamentary trust is activated on or before 31 March 2001, the trust income and assets would be attributed, via the general attribution rules, to the formal controller. However, if the trust is being administered for the sole or partial benefit of the surviving partner and if the surviving partner is exercising informal control, attribution will be to the surviving partner

The surviving partner will be attributed with the income and assets of the trust if:

• the surviving partner has control of the trust (irrespective of whether the surviving partner is a beneficiary), or
• an associate of the surviving partner has control of the trust, and the surviving partner is a potential beneficiary

If the surviving partner (or an associate of the surviving partner) does not control the trust, the trust income and assets would generally be attributed, via the general attribution rules, to the formal controller.

Some testamentary trusts will be established with a commercial trustee as the controller of the trust. In these cases the terms of the will must be examined to determine who the testator intended to benefit under the terms of the will. Attribution will be made to those who are nominated as beneficiaries of the trust. It is not possible to attribute the income or assets of a trust to a commercial trustee.