Advantages of A Testamentary Trust
- A testamentary trust provides a way for assets devolving to minor children to be protected until the children are capable of fending for themselves;
- A testamentary trust has low upfront costs, usually only the cost of preparing the will in such a way as to address the trust, and the fees involved in dealing with the judicial system during probate.
- For individuals with high marginal tax rates a testamentary trust can 'restart' the tax calculation. A testamentary trust allows income from the trust to be taxed as a separate entity (a trust) rather than simply adding the earning/income to the owners income. This provides a way for "lower than marginal tax" rates to be applied. For example the income from the Testamentary trust, if $10,000, might have no tax incurred. Whereas that same $10,000 might lose $4,600 to taxes if the income were attributed to an individual at the highest marginal tax rate.
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