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Direct Lawyers is a Brisbane-based Wills and Estates law firm that practises exclusively in Succession Law. We advise individuals and families across Queensland on whether a Testamentary Trust is right for their circumstances — and we draft them correctly when it is.
A Testamentary Trust that is poorly drafted or misunderstood can fail to deliver the protections it was designed to provide. As experienced Will Lawyers in Brisbane, our role is to make sure yours is structured clearly, reflects your intentions, and works for the people who matter most to you.
What Is a Testamentary Trust?
A Testamentary Trust is a legal Trust created within a Will that comes into effect when the Will-maker passes away. Rather than distributing assets directly to beneficiaries, the estate is held and managed by a trustee on their behalf. In Queensland, Testamentary Trusts are commonly used for asset protection, tax-effective income distribution, and supporting vulnerable or young beneficiaries.
What a Testamentary Trust Can Do
Asset Protection for Beneficiaries
Assets held within a Testamentary Trust are generally protected from claims arising from a beneficiary’s relationship breakdown, bankruptcy, or creditor action. This means that even if a beneficiary’s personal circumstances change significantly after you pass away, the assets you leave them are more likely to remain intact.
Tax-Effective Income Distribution
One of the most significant advantages of a Testamentary Trust is the ability to distribute income among multiple beneficiaries — including minor children — at adult marginal tax rates. Under current Australian tax law, income from a Testamentary Trust distributed to minors is not subject to the penalty tax rates that normally apply to children receiving investment income.
Protection for Vulnerable Beneficiaries
Where a beneficiary has a disability, mental health concern, addiction issue, or simply lacks the maturity to manage a large inheritance, a Testamentary Trust allows a trusted person to manage and distribute assets on their behalf over time. This prevents assets from being mismanaged or lost and ensures ongoing support is available.
Blended Family Considerations
For families with children from previous relationships, a Testamentary Trust can be structured to ensure that assets benefit your children specifically, rather than passing to a new partner or their family. This is one of the most common reasons Brisbane families seek advice about Testamentary Trusts.
Long-Term Control Over How Assets Are Used
A Testamentary Trust allows you to set conditions and parameters around how and when assets are distributed. You can specify that capital is preserved for education, housing, or a particular age — giving you genuine control over your legacy well beyond the date of your death.
How Testamentary Trusts Work in Queensland
How a Testamentary Trust Is Created
A Testamentary Trust is established within the Will itself — it cannot be added after the Will-maker has passed away. The Will must clearly identify the trust, appoint a trustee, define the class of beneficiaries, and set out the terms on which assets are to be held and distributed. Getting this drafting right at the outset is critical.
The Role of the Trustee
The trustee is the person or entity legally responsible for managing the Trust assets and making distributions. The trustee must act in accordance with the terms of the Trust and their general duties under Queensland Trust Law. In most cases, the trustee and the primary beneficiary are the same person — giving the beneficiary practical control while still receiving the legal protections the trust structure provides.
Discretionary vs Unit Testamentary Trusts
Most Testamentary Trusts are discretionary — meaning the trustee has broad powers to decide how much income or capital is distributed, and to whom, within the defined class of beneficiaries. A Unit Testamentary Trust (sometimes called a mandatory trust), by contrast, specifies fixed distributions. Discretionary trusts are generally more flexible and more commonly used in Estate Planning.
Discretionary vs Protective Testamentary Trust
A Discretionary Testamentary Trust provides flexibility, allowing the trustee to decide how income and capital are distributed. A Protective Testamentary Trust safeguards an inheritance for a beneficiary who may be unable to manage funds due to disability, mental health concerns, substance dependency, gambling, financial vulnerability, or poor money management. An independent trustee manages the funds for the beneficiary’s long-term benefit, reducing the risk of misuse, depletion, or undue influence.
Tax Considerations in Queensland
The tax treatment of Testamentary Trusts is governed by the Income Tax Assessment Act 1997 (Cth). Income distributed from a Testamentary Trust to minor beneficiaries is taxed at adult marginal rates rather than the penalty rates that apply to other Trust distributions to children. This can produce meaningful tax savings for families with significant estate assets. Advice on specific tax outcomes should be obtained from a qualified tax adviser in conjunction with legal advice.
When the Trust Ends
A Testamentary Trust does not last indefinitely. Queensland law imposes a perpetuity period — currently 125 years — beyond which a Trust must vest and distribute its assets. Most Testamentary Trusts are designed to end much earlier, either at a specified age, upon a particular event such as a beneficiary completing education, or at the trustee’s discretion.
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Still unsure? Our free 10-minute discovery call is the place to begin. We will listen, point you in the right direction, and let you know honestly whether we can help.
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Standard Will vs Testamentary Trust Will
Both are legally valid estate planning tools. Which is right for you depends on the complexity of your estate and the needs of your beneficiaries.
| Standard Will | Testamentary Trust Will | |
|---|---|---|
| How assets are distributed | Directly to beneficiaries on death | Held in Trust and distributed by a trustee over time |
| Asset protection for beneficiaries | Limited — assets become the beneficiary’s personal property | Strong — assets protected from relationship breakdown, bankruptcy and creditors |
| Tax planning for minor children | Minor beneficiaries taxed at penalty rates on investment income | Minor beneficiaries taxed at adult marginal rates on Trust income |
| Protection for vulnerable beneficiaries | None — assets transferred outright | Trustee manages assets on behalf of the beneficiary |
| Blended family protection | Limited — assets may pass outside intended family line | Can be structured to protect assets for specific children |
| Flexibility after death | Fixed — terms cannot be changed once the Will-maker has passed | Trustee has discretion within the Trust terms to respond to changing circumstances |
| Cost and complexity to set up | Lower — simpler to draft | Higher — requires careful drafting; complexity is the trade-off for long-term protection |
How We Work With You
01
Initial consultation
We discuss your family structure, assets, and goals to understand whether a Testamentary Trust is appropriate for your circumstances.
02
Strategy and advice
We explain the options available, including the type of trust structure, who to appoint as trustee, and how to define the beneficiary class.
03
Drafting
We prepare a Testamentary Trust Will that clearly reflects your intentions and is legally sound under Queensland law.
04
Review and sign
We walk you through the final document, answer any questions, and oversee the correct execution of your Will.
05
Secure storage
We store your Will safely in our safe custody without charge so it is accessible to the right people when the time comes.
What a Standard Will Cannot Protect Against
A Standard Will transfers assets directly to beneficiaries. For many people that is sufficient — but for others, it leaves significant risks unaddressed.
With a Standard Will Only
With a Testamentary Trust Will
Why Brisbane Families Choose Direct Lawyers
We practise only in Wills, Estates, and Succession Law. Testamentary Trusts are a core part of our daily work, not an occasional add-on.
We consider your Testamentary Trust in the context of your complete estate plan, including Superannuation, Powers of Attorney, and beneficiary needs.
We provide transparent cost estimates so you know what to expect before work begins.
We can meet you at home, your office, or another location convenient to you across Brisbane.
We explain how the Trust works, what the trustee can and cannot do, and what your beneficiaries can expect — in language that is easy to understand.
We understand Queensland Succession Law and advise clients across the state.
Common Questions About Testamentary Trusts
Yes, in many cases. A Testamentary Trust – often called a Testamentary Discretionary Trust – can provide significant tax planning advantages for Queensland families, particularly where income may be distributed to children or grandchildren.
Unlike ordinary family trusts, income distributed from a Testamentary Trust to minor beneficiaries is generally taxed at adult marginal tax rates, rather than the penalty tax rates that usually apply to children’s unearned income. This can create meaningful tax savings over time, especially for families with substantial estate assets, investment income or minor beneficiaries.
Testamentary Trusts may also become even more important under the Federal Government’s proposed 30% minimum tax on discretionary trust distributions. While the proposed rules are not yet law, genuine Testamentary Trusts are expected to be carved out from the new minimum tax regime, making them one of the few discretionary trust structures that may continue to receive more favourable tax treatment.
The tax benefit of a Testamentary Trust depends on the size and nature of the estate, the beneficiaries, the income generated by the trust, and future changes to tax law. Testamentary Trusts should be considered as part of a broader estate planning strategy with advice from both your estate planning lawyer and tax adviser.
In most cases the primary beneficiary — for example, a surviving spouse or an adult child — is appointed as trustee of their own trust. This gives them practical control over the assets while still receiving the legal protections the Trust structure provides. Where the beneficiary lacks the capacity or maturity to act, an independent trustee or co-trustee may be appropriate.
Not necessarily. A Testamentary Trust adds complexity and cost to the Will-drafting process, and it may not be warranted for smaller or straightforward estates. It is most beneficial where there are minor children, vulnerable beneficiaries, blended family dynamics, significant assets, or a concern about a beneficiary’s financial circumstances. We advise on whether it is genuinely suited to your situation.
A Testamentary Trust can only be amended while the Will-maker is alive — by updating the Will. Once the Will-maker has passed away, many of the Trust terms are fixed — so important protections cannot be changed without a court application. This is why it is important to review your Will regularly and ensure the Trust structure still reflects your intentions as circumstances change.
A family trust is established during your lifetime and operates immediately. A Testamentary Trust is created within your Will and only comes into effect when you pass away. Both are typically discretionary trusts and share similar asset protection and tax planning features, but they are created differently, funded differently, and have different benefits in terms of taxation and litigation risk.
A Family Trust is the common name for a Discretionary Trust. It is generally created during your lifetime by a trust deed. A Family Trust can hold assets, operate a business, receive income and distribute income to beneficiaries while you are alive. Family Trusts are often used for business, investment, tax planning and asset protection purposes.A Testamentary Trust Will is different. It is a Will that creates one or more trusts after you die. If you set it up, it does not exist during your lifetime. It comes into existence after your death, when assets from your estate are transferred into the trust for the benefit of your chosen beneficiaries.Looking for further information? Read our blog on the difference between a testamentary trust and a family trust.
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