Testamentary Trust

Asset Reassurance, Safeguarding, and Efficiency After You Pass

Testamentary Trust NSW

You create a Will because you want to provide both comfort and a financial helping hand to your loved ones — a Testamentary Trust can often ensure they receive the greatest benefits and protection from your legacy.

Asset bequests don’t take away the heartbreak and sorrow felt by your family and friends at your passing — but they can ensure greater security for the future. However, life circumstances can negatively impact their inheritance — and with you having left this mortal coil, there’s nothing you can do to help further.

Excessive taxation, your spouse remarrying and their partner becoming entitled to a share in your estate, or a beneficiary with solvency issues losing all their inheritance to creditors. Issues which can reduce or absorb all of your generous legacy.

Often working alongside financial planners and accountants — Falzon Legal will guide you through the complex process of Testamentary Trusts in Australia. Ensuring your assets and finances are protected for the next generation — and the reassurance of knowing your loved ones will benefit as you intend.

Testamentary Trusts Explained by Falzon Legal

In a straightforward Will, you declare the elements of your estate — property, cash, valuables, etc. — and who you wish to receive these assets.

And, after the Executor of your Will has gained Probate after your passing, they will transfer your estate directly to the beneficiaries — in accordance with your wishes.

However, by creating a Testamentary Trust, the process is slightly different — offering significantly more flexibility.

Instead of assets passing directly to inheritors, they are placed into a Trust. This can include the total sum of all your estate, or a proportion as declared in your Last Will and Testament.

Your nominated Trustees decide which of your stated beneficiaries receive their inheritance, how much, and at what time. Constantly, their decisions are guided by your wishes. As such, it is a Discretionary Trust — with the onus falling on the Trustees to make allocation decisions.

Initially, it may appear that this is a rather convoluted method of distributing your legacy. However, this framework can provide immeasurable benefits to your family and loved ones.

The Testamentary Trust Advantages

There are numerous Testamentary Trust tax benefits that may or may not be applicable to your circumstances, and most importantly, those of your intended beneficiaries. 

At Falzon Legal, our expert team will compassionately explain whether a Testamentary Trust is suitable — and then build a powerful and reassuring framework that meets your wishes and intentions.

Although the advantages differ from person to person, the most common upsides include:


As Testamentary Trusts are allowed to cover a span of 80 years — it’s not just one generation that may benefit from your estate. For example, your children, grandchildren, and potential grandchildren can enjoy an inheritance long after your passing.

Furthermore, inherent flexibility can permit the Trustees to decide when, and to whom, to distribute assets — to deliver the most advantageous position to the beneficiaries. This can take into account taxation factors, health, special requirements, or marriage circumstances.

Bear in mind that your appointed Trustees can only transfer assets to your nominated beneficiaries — including those who are yet unborn.

Spouse Remarriage

Should you pass on leaving your spouse behind, naturally you want them to be happy. And, as tough as it may be to accept, this may involve remarriage or a new de-facto relationship.

If you’re concerned that your husband or wife’s future partner may squander your legacy, inherit it if your spouse dies, divert it to their own family, or only marry for financial gain — you can safeguard it with a Testamentary Trust.

By holding your estate in Trust, and only distributing to nominated beneficiaries, you can determine exactly who receives your legacy. For example, shielding certain funds for the benefit of your grandchildren — not touchable by your spouse’s new family.

Children Divorcing

Should one of your children divorce — their ex-wife or husband may be entitled to a share of the inheritance. If you are uncomfortable with this scenario — it’s sensible to consider a Testamentary Trust.

Since your assets are held in Trust, they are not in the ownership of a specific individual — until such time that they are distributed. Therefore, in the event of divorce, the Family Court cannot create an order to access funds and property. Not only does this deliver peace of mind to you, but also significant reassurance and protection to your children.

That said, it’s possible that a Trust may be considered an advantageous Financial Resource by the Court — which could possibly be taken into account during any property settlement.

Claims From Creditors

With a standard Will, should a beneficiary have solvency problems and be subject to claims from creditors for repayment — they may lose all their inheritance to satisfy these existing liabilities.

However, a Testamentary Trust can safeguard their share from a third party making a legal claim on their assets.

Since your estate is held by the Trust on behalf of all beneficiaries — not one single person — the funds are protected from creditor action.

Acting in the Best Interests of Beneficiaries

You create a Will because you love and care for family and friends — and want to help them in any way that you can. Unfortunately, your financial generosity may be rapidly, and often unintentionally, depleted.

Cognitive or behavioural issues, addiction, a weakness for gambling, or just carelessness can lead your beloved beneficiaries to lose assets. An upsetting thought when you want to help, but believe a gift may not provide the potential advantages it deserves.

A Testamentary Trust can shield your legacy from being depleted by beneficiaries — by permitting Trustees and family members to manage the inheritor’s inheritance in their best interests.

Providing for Education

A Testamentary Trust can ensure all or part of your estate is set aside for particular uses or scenarios — one of the most popular of which is for education.

For example, you may wish that your funds are used for a grandchild’s education — such as boarding school costs, private tuition, or university fees. This can prevent others from utilising bequeathed assets, however well-intentioned, for purposes that don’t match your intentions.

Furthermore, providing for your grandchildren or dependents in this manner can often provide a more tax-effective method than simply leaving funds to be distributed upon your passing.

Tax Efficiencies

Looking at how to reduce Capital Gains Tax on property in Australia? Use a Testamentary Trust!

As the Trust has the inherent versatility to move assets that are liable to CGT to a beneficiary with a lower income — this can possibly eliminate or reduce the tax due. Furthermore, any assets moving into a Trust do not automatically initiate a capital gains liability — permitting beneficiaries to defer it to a later date.

For Income Tax, amounts due are paid at the marginal rate for any Trust income — the liability falls on the beneficiary receiving the funds. If a beneficiary has children under 18 who are also eligible beneficiaries, they can receive this income — with full allowance of the adult tax-free threshold.

Bear in mind that all tax efficiencies of a Testamentary Trust are enjoyed by your beneficiaries, you personally gain no upsides — apart from the satisfaction you’re helping loved ones financially in the most advantageous manner.

At all times, Falzon Legal will communicate clearly, efficiently, and promptly with your existing financial planner or accountant. As we cannot provide investment or taxation advice — this reassuring symbiosis ensures you act both legally and financially responsibly.

And, if you don’t currently have a financial professional, we can recommend a responsible practitioner from our trusted network.

Discover How a Testamentary Trust Asset Protection Benefits Loved Ones — Call NOW

The Testamentary Trust Disadvantages

Although a Testamentary Trust can offer a multitude of benefits for your estate inheritors — there are a few possible downsides.

Working together, we will look at the position of your estate — and your intended beneficiaries — and advise of any drawbacks to creating a Trust.

Depending on your circumstances, these can include:

Cost of Administration

Compared to a straightforward Last Will and Testament, the Testamentary Trust Will Cost is more expensive.

The actual costs depend on numerous factors — including the type of Trust, the number of trustees and beneficiaries, the value of your estate, and the complexity of your interests. 

As specialist Estate and Will planning lawyers — Falzon Legal will ensure your Trust is professionally built in line with your intentions, and at the most cost-effective price.

You Receive No Immediate Benefit

Unlike other Estate Planning options — such as Enduring Guardianship and Care Directives — a Testamentary Trust is established for the advantage of your beneficiaries, not yourself.

However, your Will is your legacy — in all senses of the word.

It’s your consideration and kindness being passed onto others — and a Testamentary Trust can elevate your estate’s security, efficiency, and net value for your loved ones.

Testamentary Trust Cost

Compared to a straightforward Last Will and Testament, the Testamentary Trust Will Cost is more expensive.

The actual costs depend on numerous factors — including the type of Trust, the number of trustees and beneficiaries, the value of your estate, and the complexity of your interests. 

As specialist Estate and Will planning lawyers — Falzon Legal will ensure your Trust is professionally built in line with your intentions, and at the most cost-effective price.

Tax Efficiency Guarantees

Currently, a Testamentary Trust can deliver attractive tax efficiencies for both CGT and Income Tax.

However, it cannot be guaranteed that, should legislation change, these benefits will remain for the duration of the Trusts’ life.

Succession, Contests, and Challenges

Although you nominate your beneficiaries, in most cases, it will be the Trustee or Trustees who determine who receives assets and funds, at what time, and how much they enjoy — not you.

Therefore, it’s important to discuss with your potential Trustees how you wish your Testamentary Trust to be handled. Furthermore, in the case of a sole Trustee, you need to declare who will take on this role should they also become deceased.

Related to the above, if a nominated beneficiary feels that their access to Trust income is blocked or insufficient — they may challenge the Will.

Types of Testamentary Trusts

Generally speaking, there are two main forms of Testamentary Trust — Separate (Single) Trusts and Family Trusts.

Separate Trust

You can have individual Trusts for each of your beneficiaries — allowing for more focused attention on your inheritor’s needs.

This may be advantageous if your potential beneficiaries have specific requirements or circumstances. For example, you could create one Trust to address the educational future of a grandchild, and another to manage an insolvent relation’s inheritance.

Family Trust

A Family Trust places all the estate into a single pot, which is then distributed to the beneficiaries. This can be a proactive measure to ensure financial efficiency — such as minimising capital gains tax on inherited property in Australia, as explained above.

Separate or Family Trust? Discuss With Our Friendly Experts Today — Call Now

How To Set Up a Testamentary Trust

In order for your Testamentary Trust to be legal, achieve your intentions, and maximise the benefits of your loved ones — you need expert assistance.

Falzon Legal will navigate you patiently and considerately through the complexities of Testamentary Trusts planning, and create a tailored framework to meet your objectives — giving you invaluable peace of mind.

That said, as a straightforward Testamentary Trusts for Dummies 101 — this is the procedure:

1. Decide What Assets the Trust Will Hold

Part of creating a Will involves building an inventory of your assets — physical and monetary — and their value. 

When constructing your Testamentary Trust, you decide what elements of your estate it will contain. This can be everything you own, or just specific property, shares, or financial sums.

2. Nominate a Trustee

The next step is to select one or more persons to manage your Trust when you pass on. 

This should be someone who:

  • You hold in good standing.
  • Are honest and reliable.
  • Willing and able to attend to the Trust for the long term.
  • Understand and respect your intentions for the Trust.
  • Will act in the beneficiaries’ best interests.

Often, people elect their spouse or close family member to be responsible for the Trust. However, where the Trustee is also a beneficiary, this can create some issues — it’s important you speak to Falzon Legal to discuss this matter.

3. Decide on Beneficiaries

You can name anyone as a beneficiary —spouse, family member, friend, or an organisation. If you’re thinking about nominating a charity — speak to Falzon Legal about Charitable Trusts. 

Remember, a Trust can last up to 80 years — so, it’s worthwhile considering future beneficiaries who will still be around after the primary beneficiaries are deceased.

4. Consider the Format of Your Trust

Testamentary Trusts permit you to declare what part of your estate beneficiaries may receive — and when.

For example, you can prevent younger inheritors from accessing any funds until they reach the age of 18 — while allowing a Trustee to release cash before then to pay for education, etc.

5. Sign Your Will

A Testamentary Trust only becomes valid once your Last Will and Testament is signed and witnessed.

Once finalised, and barring any future amendments, this is all that needs to be completed during your lifetime.

6. When You Pass On

After you die, the responsibility initially falls upon the Executor. Once Probate is achieved, they must:

  • Inform the beneficiaries that they are in the Will under a Testamentary Trust.
  • Inform the Trustee.
  • Employ an accountant.
  • Apply for a TFN (Tax File Number).
  • With assistance from the accountant, transfer the relevant estate to the Trust.

Creating a Testamentary Trust is not something you can — or should — do yourself. It’s crucial to have the expert knowledge of Estate Planning specialists to ensure the Trust is legally binding.

Are Testamentary Trusts Irrevocable?

At any point you can amend your Testamentary Trust — whether you wish to add or remove beneficiaries, appoint a different Trustee, or even completely remove the Trust from your Will.

However, once you pass on, your Testamentary Trust is irrevocable.

That said, in NSW, the Succession Act (2006) does permit eligible persons to make a Family Provision Claim — should they believe they have not been sufficiently provided for in a Will.

The chances of success are, however, limited — and would depend on solid evidence that, for example, the Testator formed the Trust purposely to avoid providing for entitled persons and dependents.

Falzon Legal — Parramatta’s Expert in Testamentary Trusts

Amiable, considerate, and relentlessly professional — Falzon Legal is Sydney’s specialist Testamentary Trust Lawyers.

We understand that attending to complex, post-death matters can be emotionally stressful and challenging. However, we will professionally navigate you through Testamentary Trusts — explaining the benefits and disadvantages, how it works as a part of overall Estate Planning, and whether it’s suitable for your circumstances.

Acting now can ensure that your Will provides the most substantial advantages to your loved ones after you pass on — shielding against unwanted profiteers, excessive taxation, or the financial mismanagement of an inheritor.

From our offices located in Parramatta — we can meet at a place comfortable and convenient for you. Whether that’s at our premises, your home, hospital, or place of residential care.

Ceaselessly supportive, we commit to providing the pinnacle of advice in Testamentary Trust set-up — with genuine understanding, warmth, and the human touch.

Testamentary Trust FAQs

Can a Testamentary Trust Be Contested?

Yes. A Testamentary Trust can be contested or challenged. For example, if a claimant can provide evidence of a lack of testamentary capacity — i.e. the Testator has insufficient mental ability to make a Will.

What Is the Testamentary Trust Meaning?

Forming part of a Will, a Testamentary Trust holds the assets of the deceased — which are then distributed at the Trustee’s discretion to beneficiaries.

Do You Pay Tax When Inheriting Property From Parents Australia? 

Unless your inherited property is your primary place of residence, you may be liable to Capital Gains on income received from the property — whether profit on the sale or rental income. 

A Testamentary Trust can mitigate tax liabilities — speak to Falzon Legal today to discover how.

How To Avoid Capital Gains Tax on Inherited Property?

A Testamentary Trust can help reduce, or in some circumstances eliminate, Capital Gains Tax on inherited property proceeds. This is a complex area, which requires specialist advice, speak to Falzon Legal.

Can You Add Assets to a Testamentary Trust?

Yes, assets can be added to a Testamentary Trust. These are allocated to the nominated beneficiaries at the Trustee’s discretion.

Can You Add Money to a Testamentary Trust?

Yes. Any part of your estate can be added to a Testamentary Trust — from cash and premises, through to heirlooms and shares.

How To Reduce Capital Gains Tax on Investment Property?

If inherited investment property generates income, it’s possible to legally reduce Capital Gains Tax through efficient allocation of proceeds to particular beneficiaries. Speak to Falzon Legal.

Is There Tax on Inherited Property Australia?

There is no inheritance tax in Australia, although being a beneficiary of property may, in some circumstances, lead to a Capital Gains Tax liability. A Testamentary Trust can reduce such taxes through streamlining the allocation of property income.

Testamentary Trust vs Will — What Is the Difference?

A Testamentary Trust forms part of a Will. It declares what assets of the deceased estate are to be transferred to a Trust — and names a Trustee who will decide when and how much of the legacy is allocated to nominated beneficiaries.

Straightforward Will vs Testamentary Trust — What Is Best For Me?

A Testamentary Trust can have numerous advantages over a standard Last Will and Testament — including safeguarding assets from negligence, reducing tax liabilities, and shielding against insolvency claims.

However, they are not suitable for everyone. Chat with Falzon Legal today to discover if a Testamentary Trust is advantageous for your legacy.

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