Testamentary Trust Lawyers Sydney, NSW

What is a Testamentary Trust?

A Testamentary Trust is a trust created within your Will that comes into effect after your death. Instead of assets passing directly to beneficiaries, they are held in the trust and managed by a Trustee on their behalf.

What is the main benefit of a Testamentary Trust?

The primary benefits are superior asset protection and potential tax advantages. Assets held in the trust are protected from creditors or family law claims against a beneficiary, and income can be distributed in a more tax-effective way.

What’s the difference between a Will and a Testamentary Trust?

A Will outlines how your estate is distributed. A Testamentary Trust is a specific structure within a Will that dictates how some or all of that estate is managed and protected for your beneficiaries after you die.

How does a Testamentary Trust protect assets?

Because the assets are legally owned by the trust, not the beneficiary, they are generally shielded if a beneficiary faces bankruptcy, business failure, or a relationship breakdown.

Are there tax advantages to a Testamentary Trust?

Yes. A key benefit is that income distributed from the trust to beneficiaries under 18 is taxed at adult marginal rates, allowing access to the full tax-free threshold, which is a significant advantage.

Who is the Trustee and what do they do?

The Trustee is the person or company you appoint in your Will to manage the trust. They have a legal duty to manage the trust’s assets and make distributions to beneficiaries according to the rules you set out.

Who can be appointed as a Trustee?

You can appoint a trusted family member, a friend, or a professional such as a solicitor or accountant. It should be someone capable and reliable who will act in the best interests of the beneficiaries.

Who can be a beneficiary of a Testamentary Trust?

You can name anyone as a beneficiary, including your spouse, children, grandchildren, other relatives, friends, charities, or even future beneficiaries who are not yet born.

Can I have more than one Testamentary Trust in my Will?

Yes. You can establish multiple trusts, such as a separate trust for each child or beneficiary, allowing the trust terms to be tailored to individual needs.

Can a Testamentary Trust protect a high-risk beneficiary?

Yes. A Testamentary Trust can protect beneficiaries who may be vulnerable to addiction, gambling, or poor financial management, as the Trustee controls how and when funds are distributed.

What is a discretionary Testamentary Trust?

This is the most common type of Testamentary Trust, where the Trustee has discretion to decide which beneficiaries receive income or capital, how much they receive, and when they receive it.

What assets can be placed in a Testamentary Trust?

Almost any asset from your estate can be placed in the trust, including cash, real estate, shares, investments, and other valuable items.

When does a Testamentary Trust come into effect?

A Testamentary Trust comes into effect after your death, once your Will has been administered and the trust assets have been transferred according to its terms.

Can a Testamentary Trust be changed or revoked?

While you are alive, you can change or revoke the trust provisions by updating your Will. After your death, the trust generally becomes irrevocable.

Can a Testamentary Trust be contested?

Yes. As part of a Will, a Testamentary Trust can be subject to a family provision claim, although a well-structured trust can help protect the estate.

What is a Special Disability Trust?

A Special Disability Trust is a specific type of Testamentary Trust designed to provide for the reasonable care and accommodation needs of a beneficiary with a severe disability, while helping preserve their entitlement to government benefits.