Testamentary trust

And then the trustee has their powers to invest the capital and generate the income.

So in a discretionary trust that is classified as a capital-reserved testamentary trust, Each year, the income is received by the trustee and there is a range of beneficiaries who are entitled to the income.

And that will usually include spouses of the beneficiaries, so everyone in the whole family.

And then...

Okay, so to recap, usually people use a capital reserved trust because they want to allocate the income to the spouse, but protect the capital for their bloodline or lineal descendants.

So it's usually a tax strategy and they're trying to have their cake and eat it too, where they want to make sure that it's not exposed on a relationship breakdown to divorce proceedings, but they want to utilize the lower tax rate of a spouse.

So to be a total cliche, let's say you've got parents who create a Capital Reserved Testamentary Trust for their adult son, and he is married, and they are in their mid-20s to mid-30s and building their family in that phase.

Or maybe the wife is a stay-at-home parent and homemaker.