Should I Establish One Testamentary Trust for Multiple Beneficiaries or Separate Trusts for Each Beneficiary?
It really depends on what YOU want.
TLDR version:
- Single trust - flexibility to use the bigger combined fund in case one of the trust beneficiaries needs more resources say due to unforeseen circumstances such as medical emergency.
- Separate trust - clear segregation such that the funds allocated to each separate trust cannot be used for the other trust beneficiaries.
Consider a scenario where one trust is under utilised while the other lacks funds. If the intention is to have the trust fund with excess funding support the one that lacks, it will be more straightforward to place them in the same trust fund.
Based on our experience, settlors typically would have just one trust with multiple trust beneficiaries within (e.g. allocate assets to just one testamentary trust and within the trust have all the trust beneficiaries and their payout accordingly). This way, the trust beneficiaries can all benefit from the same pool of trust assets.
Aside from having multiple trust beneficiaries in the same trust, you can also have multiple payouts for the same trust beneficiary.
If the trust funds are intended to be mutually exclusive, i.e., even if one fund is depleted, the other trust fund is not to be used, then separate trusts would be more appropriate to mark the distinction.
Do note that if the testamentary trust has only ONE trust beneficiary (including having the same person as the remainder beneficiary), the trust beneficiary upon reaching age 21 can terminate the trust even if it is contrary to your intentions (i.e. the rule in Saunders v Vautier).