How to Avoid Unnecessary Death Duties

Your Testamentary Trust Will and Surcharge Duty and Tax

The State Revenue Legislation Further Amendment Act 2020 (NSW) (“the Act”) was assented to on 24 June 2020. The Act has implications for the trustees of Testamentary Trust Wills.

The Act provides that if a Trustee of a Discretionary Trust (including testamentary trusts) is taken to be a foreign trustee, real property owned by the Trust is subject to surcharge purchaser duty and land tax, when a potential beneficiary to the Trust could be a foreign person (whether or not that person actually received a benefit from the Trust).

The Trustee of an Australian Testamentary Trust is not a foreign person (even if the trust does not prevent a foreign person from being a beneficiary of the trust) if:

  • the Will or Codicil was executed on or before 31 December 2020; or
  • the deceased died intestate before, or within two years after, 24 June 2020; or
  • a Court order varying the application of the provisions of a Will or Codicil or rules governing distribution of intestate estate was made on or before 31 December 2020.

For some people it may be fine to include a clause in your Testamentary Trust Deed excluding foreign persons as beneficiaries. However, problems may arise when, at the time of your death, one of the beneficiaries of the Testamentary Trust is a foreign person and excluding them from being a beneficiary will see them miss out on their inheritance. I’m sure your beneficiary would rather pay surcharge purchaser duty or land tax than miss out on their inheritance all together.

How Can We Help?

In response to the Bill we have added a clause to our Testamentary Trust Wills which allows a beneficiary under your Will to seek advice from legal and taxation experts at the time of your death as to whether to exclude foreign persons as beneficiaries or not depending on their circumstances.

If you would like to speak to an estate planning lawyer in relation to our customisable Beneficiary Controlled Testamentary Trust Wills or your estate planning generally please call 02 4952 3901 today to see how we can help.

By Rebecca Wosman

Associate Solicitor