Where a deceased person leaves their assets directly to beneficiaries, the transfer from the deceased to their legal personal representatives and then to the beneficiaries is all exempt from CGT. In some cases, however, instead of leaving their assets directly to beneficiaries, the deceased may instead decree through their Will that their assets be held on trust for the beneficiaries. This trust is known as a Testamentary Trust. These trusts are used for various purposes, including:
- To ensure that beneficiaries do not waste their inheritance;
- For asset protection purposes;
- For tax planning purposes (ie. enable adult tax rates to apply for minor beneficiaries).
While the transfer from the deceased to the testamentary trust is exempt from CGT, there were doubts surrounding the subsequent transfer from the trust to the beneficiary and whether this was CGT exempt. The government has now passed legislation clearing up this confusion. Transfers from testamentary trusts to beneficiaries are now CGT exempt.
For more information, please contact Rockliffs Lawyers in Sydney.