What is a Testamentary Trust Will, and Why Would I Need One in South Australia?
- jcraigmckay
- Jul 22
- 3 min read
Updated: Jul 22
A testamentary trust will is a powerful estate planning tool that can provide significant benefits for families and individuals in South Australia. If you are considering how best to protect your assets and provide for your loved ones after your death, understanding the role and advantages of a testamentary trust will is essential.
What is a Testamentary Trust Will?
A testamentary trust will is a type of will that establishes one or more trusts upon the testator’s death. Unlike a standard will, which distributes assets directly to beneficiaries, a testamentary trust will holds those assets in trust, managed by a trustee for the benefit of nominated beneficiaries.
Key features:
The trust is created by the will and only comes into effect after the testator’s death.
The trustee manages the assets according to the terms set out in the will.
Beneficiaries receive income or capital from the trust as specified.
Why Would You Need a Testamentary Trust Will?
There are several compelling reasons to consider a testamentary trust will, particularly for families in South Australia:
1. Tax Advantages
Testamentary trusts can offer significant tax benefits, especially for minor beneficiaries, who may be taxed at adult rates on income from the trust.
2. Flexibility in Distribution
Allows for tailored distribution of assets, such as staggered payments or conditional gifts.
Useful for blended families or complex family situations.
3. Asset Protection
Shields assets from potential claims by creditors or in family law proceedings.
Protects inheritances for vulnerable beneficiaries, such as minors or those with disabilities.
4. Safeguarding Vulnerable Beneficiaries
Ensures that children, individuals with disabilities, or those at risk of financial mismanagement are provided for responsibly.
Testamentary Trust vs Family Trust
While both structures involve holding assets in trust, there are key differences:
Testamentary Trust:
Created by a will, comes into effect upon death, and is subject to the terms of the will.
Family Trust (Discretionary Trust):
Established during the settlor’s lifetime, operates independently of a will, and is often used for ongoing asset protection and tax planning.
How to Set Up a Testamentary Trust Will in South Australia
Consult an Estate Planning Lawyer:
Professional advice is essential to ensure the will is valid and the trust is structured correctly.
Draft the Will:
The will must clearly set out the terms of the trust, including the trustee, beneficiaries, and powers of the trustee.
Review Regularly:
Update your will as family circumstances or laws change.
Who Should Consider a Testamentary Trust Will?
Parents of minor children
Individuals with beneficiaries who have disabilities or are vulnerable
Blended families or those with complex family structures
Those seeking asset protection from creditors or family law claims
Individuals with significant assets or business interests
Frequently Asked Questions
What is the main benefit of a testamentary trust will?
The primary benefit is asset protection and tax efficiency for beneficiaries, particularly minors.
How is a testamentary trust taxed in Australia?
Income distributed to minor beneficiaries from a testamentary trust is generally taxed at adult rates, which can result in significant tax savings.
Can I have more than one testamentary trust in my will?
Yes, you can establish multiple testamentary trusts for different beneficiaries or purposes.
Who can be a trustee?
A trustee can be a trusted family member, friend, or a professional such as a solicitor or accountant.
Is a testamentary trust will suitable for everyone?
While highly beneficial in many cases, they may not be necessary for simple estates or where beneficiaries are financially responsible adults.
Key Considerations and Examples
Blended Families:
Testamentary trusts can ensure children from previous relationships are provided for.
Vulnerable Beneficiaries:
Protects inheritances for those unable to manage finances.
Tax Planning:
Income splitting among beneficiaries can reduce overall tax liability.
Contact Our Adelaide Estate Planning Lawyers
A testamentary trust will can provide peace of mind, flexibility, and protection for your loved ones. If you are considering your estate planning options in South Australia, our experienced team can guide you through the process and tailor a solution to your family’s needs.
Take advantage of our complimentary Will Review, or review our Wills services, receive our FAQ, or book an appointment.
This article is for general information only and is not a substitute for legal advice. For advice specific to your situation, please contact our office.
