Should You Include a Testamentary Trust in Your Will in 2026?
Testamentary trusts have become a popular and powerful estate planning tool for many Australians looking to safeguard their legacy and provide meaningful, long-term benefits for their beneficiaries. As we continue through 2026, more people are considering whether a testamentary trust should be part of their Will and with good reason.
Whether you’re planning for minor children, protecting adult children’s inheritances, or simply looking to reduce risks to your estate, a testamentary trust offers significant legal and practical advantages. Below, we explore what testamentary trusts are, who should consider them, and why they are increasingly a core feature of modern estate plans in Queensland.
What Is a Testamentary Trust?
A testamentary trust is a discretionary trust that is created under the terms of a Will and comes into effect after the death of the Will-maker (usually upon the death of the last surviving spouse). Rather than distributing assets directly to individual beneficiaries, a testamentary trust holds those assets on behalf of beneficiaries and is managed by appointed trustees.
Key features of a testamentary trust include:
Assets are owned by the trust, not the individual beneficiaries.
Trustees manage and control the assets, with wide discretion over distributions.
Beneficiaries receive the benefit of the assets (e.g., income or capital distributions) without directly owning them.
Testamentary trusts can now operate for up to 125 years under the updated Property Law Act 2023 (Qld), allowing long-term, intergenerational planning.
Who Should Consider a Testamentary Trust?
There are three common scenarios where a testamentary trust is particularly beneficial:
Adult Children with Relationship or Financial Risk Factors
If your children are adults and you have concerns about their relationships (e.g. potential separation or divorce), a testamentary trust can protect their inheritance from being included in family law property settlements. Testamentary trusts also provide protection in cases of bankruptcy, financial mismanagement, or litigation. The assets remain in the trust and are not deemed personal property of the beneficiary helping to prevent claims or seizure.
Minor Children and Blended Families
For families with young children, a testamentary trust offers a structured way to manage funds for a child’s upbringing while providing additional layers of oversight. The trust ensures that assets are used for the benefit of the children but can be managed by a trusted adult (not necessarily the surviving parent or legal guardian). Control can be gradually passed to the child when they reach a nominated age, typically 28 or 30, through the role of "appointer" and eventually "trustee".
Larger or Growing Estates
With rising property prices, many estates in Queensland now exceed $1 million even for modest households. A testamentary trust provides a practical framework for managing substantial inheritances, including tax-efficient income distribution (particularly where minor children are beneficiaries) and flexibility in how assets are used or invested. It also helps prevent large lump sum payments being made directly to beneficiaries who may not be ready to handle significant funds.
Advantages of Testamentary Trusts
There are several compelling benefits to including a testamentary trust in your Will:
Asset Protection: In the event of divorce, bankruptcy, or court-ordered debts, trust assets are generally excluded from the beneficiary’s personal asset pool.
Tax Efficiency: Income distributed to minors through a testamentary trust is taxed at adult rates, which can result in substantial tax savings.
Long-Term Control: Trustees can invest, manage, and distribute funds according to your wishes, preserving the value of the estate over time.
Intergenerational Planning: Testamentary trusts can support your children, grandchildren, and even great-grandchildren over several generations.
What If My Children Don’t Like the Idea?
Some clients worry that their children may be disappointed to receive their inheritance through a trust rather than directly. While that concern is understandable, it’s important to remember: this is your estate, and your estate plan should reflect your wishes and values. You’ve worked hard to build your assets—you have the right to ensure they’re used wisely and protected.
For parents looking to strike a balance, one option is to leave a modest cash gift directly to children and place the remainder into the testamentary trust. Open communication, paired with a detailed letter of wishes, can also help your family understand your reasons and intentions.
Is a Testamentary Trust Only for the Wealthy?
Not at all. While testamentary trusts are sometimes associated with high net worth estates, they are increasingly recommended for anyone with an estate valued over $500,000. The combination of asset protection, tax benefits, and flexibility makes them a valuable option for a wide range of Queensland families.
Should You Update Your Will to Include a Testamentary Trust?
If your current Will does not include a testamentary trust or you’re unsure whether your estate plan is still fit for purpose, 2026 is a great time to revisit your arrangements. Testamentary trust Wills can be tailored to your specific circumstances and are a key part of many modern estate plans.