A testamentary trust is a trust you set up inside your will. The trigger for its creation is your death. When you die, some or all of what you leave goes into the trust, rather than straight into your loved ones' hands. A person you choose, called the trustee, then looks after it for them.
Most people I meet think trusts are for wealthy families with an accountant on speed dial. That's not who I usually see. I see parents with young kids, a home, some super and a mortgage. I see grandparents who lie awake worrying about a son's shaky marriage. For many everyday Queensland families, a testamentary trust is one of the simplest ways to make sure what you leave behind reaches the people you love.
In this guide, I'll explain how a testamentary trust works and who it protects. Just as importantly, I'll explain what it can't do.
How does a testamentary trust work?
Think of it as a protective container inside your will. Instead of saying "I leave everything to my children", your will says "I leave everything to the trustee of a trust for my children". The trust holds the assets. Your children still benefit from them. They just don't own them outright.
Every testamentary trust has a few key roles:
Trustee: the person or people who manage the money and property, and decide who receives what and when.
Beneficiaries: the people the trust is there to help, usually your children and grandchildren.
Appointer: the person who can remove and replace the trustee. This role holds the real control, so who you choose matters.
Say you leave your home, some shares and money in the bank. After you die, your executor (the person who carries out your will) moves those assets into the trust. The trustee might rent out the house, collect the share dividends and pay that income to your children. Or they might pay school fees on your children's behalf. You can read more about how we set these up for families.
A testamentary trust only exists because of your will. It doesn't start until you die. While you're alive and have capacity, you can change it whenever you like, simply by updating your will.
Why leaving everything "straight to the kids" isn't always the kind choice
Leaving your estate directly to your children feels simple and fair. Often it is. But once an inheritance lands in someone's name, it's theirs. It gets mixed in with everything else they own, and it's exposed to whatever happens in their life next.
That might be:
A separation or divorce, where inherited money can end up in the pool of assets split with a former partner.
Bankruptcy or business debts, where creditors can chase assets your child owns personally.
A child who isn't good with money, or who is easily pressured by others.
Your surviving spouse re-partnering, so assets meant for your children slowly drift to a new family.
A testamentary trust puts some distance between your child and the assets so that they aren’t considered the personal assets of that child. A well-drafted trust also includes a disqualification clause. This means a beneficiary steps away from controlling the trust if they separate from a spouse, go bankrupt or lose capacity. If you're worried about protecting an inheritance from the in-laws, this is usually the first tool we talk about.
I had a couple with two adult children come to me for their estate planning. They had real and genuine concerns about one of their children’s marriages and considered that separation was imminent. They wanted to make sure their child, and their grandchildren were looked after when they were gone. So we set up a testamentary trust in their Will, one for each of their children. They were trustee of each other’s trust to strengthen the argument that they were not the sole controller of those assets and they did not form part of those child’s personal assets in the event of a divorce.
How a testamentary trust looks after young children
If you have young children, you've probably thought about who would raise them. Fewer parents think about who would manage their money.
Children under 18 can't take control of an inheritance themselves. A simple will usually holds their share until they turn 18, then hands it over in full. Most parents I speak with don't love the idea of an 18 year old receiving a house deposit with no guidance at all.
A testamentary trust lets you:
Choose a trustee to manage the money until your children are older.
Choose someone other than the guardian who raises them, so no one person has to carry every role.
Keep an ex-partner from taking control of your children's inheritance.
Set an age, often somewhere between 25 and 30, when your children take over control themselves.
If you're planning for your minor children, this is one of the most important parts of the conversation.
I often get single parents in my office concerned about the other parent of their child being in control of their estate if they pass. A testamentary trust is a fantastic way to decide who actually is control of the money and not let it fall on the surviving parent. We will create testamentary trusts where the trustee is someone close to the testator and plan for their child to take over at an appropriate age.
What a testamentary trust can't do
A testamentary trust is a strong tool, but it isn't a magic shield. It's worth knowing its limits before you decide.
It won't stop someone contesting your will. The trust is created by your will, so the assets still pass through your estate first. An eligible family member can still make a family provision application, which is a claim that they weren't adequately provided for.
It doesn't automatically capture your super. Super isn't part of your estate unless it's paid to your executor. If you want your super to flow into the trust, you need the right nomination in place. Here's more on how superannuation fits into your estate.
It's only as good as the people running it. Choose a trustee and appointer you trust, who will work well with your family.
It comes with ongoing admin. A trust needs its own bank account, records and tax return each year.
Is a testamentary trust only for wealthy families?
No. This is the assumption I'd most like to challenge.
With Queensland property prices where they are, many ordinary households have estates far bigger than they realise. Add a paid-off home, super and life insurance, and a modest estate can quickly become a significant one.
As a general guide, I suggest considering a testamentary trust once your estate is worth around $500,000 or more. Below that, the running costs may outweigh the benefits. Above it, the protection is usually worth weighing up seriously. If your children don't get along, or you'd like each child to manage their own share, you can also set up a separate trust for each child.
What makes a good testamentary trust?
A testamentary trust copied from a will kit is rarely enough. The value is in the details, and those details should fit your family. A good one covers:
Who will be trustee and appointer, and who steps in if they can't.
The age when each child takes control.
Disqualification clauses for separation, bankruptcy or loss of capacity.
Whether each child gets their own trust.
A letter of wishes, which is a personal note to your trustee explaining how you'd like the money used.
Your super nominations and how your property is owned, so your assets actually reach the trust.
If you're weighing up whether to include a testamentary trust in your will this year, these are the questions to bring to your appointment.
A testamentary trust isn't about controlling your family from beyond the grave. It's about making sure what you've worked hard for reaches the people you love, in a way that protects them. Now you know how it works, you're in a much better place to decide whether it belongs in your will.
A testamentary trust is a trust set up in your will that only starts after you die.
A trustee you choose manages the assets for your beneficiaries, who benefit from them without owning them outright.
It can help protect an inheritance from a beneficiary's separation, bankruptcy or poor money management.
It lets you choose who manages young children's money and the age they take control.
Income a child under 18 receives from a testamentary trust is generally taxed at adult rates, which can save tax.
It does not stop a family provision claim, and super only flows into it with the right nomination.
It is worth considering for many everyday families, not just wealthy ones.
List what you own, including your home, super, life insurance and any shares or business interests.
Think about who in your family might need protection, and why.
Consider who you would trust as trustee and appointer.
Check your super nominations and how your property is owned.
Talk it through with an estate planning lawyer, so your will and trust fit your family.
You don't have to work this out on your own. We can talk through your options together, step by step.
Book a free consultation with Lidia Vicca
What is a testamentary trust in simple terms?
A testamentary trust is a trust created by your will that starts after you die. A trustee you choose manages the assets for your beneficiaries, so they benefit without owning the assets outright.
What is the difference between a will and a testamentary trust?
A will says who receives your assets. A testamentary trust is part of a will. It holds some or all of those assets in trust for your beneficiaries, instead of handing them over outright.
Does a testamentary trust protect an inheritance in a divorce?
It can make it much harder for an inheritance to be treated as your child's personal property in a separation, especially with a disqualification clause. It isn't a guarantee, so the trust needs careful drafting for your family.
Can a testamentary trust stop someone contesting my will?
No. The trust is created by your will, so an eligible family member can still make a family provision claim against your estate. Good planning can reduce the risk, but it can't remove it.
How long can a testamentary trust last in Queensland?
A testamentary trust in Queensland can last for up to 125 years. That means it can support your children, grandchildren and beyond.
Is a testamentary trust worth it for a small estate?
It depends on your family and your assets. As a general guide, it's worth considering once your estate is around $500,000 or more. It can still help a smaller estate where a beneficiary is young or vulnerable.