The advantages depend on your family circumstances, the assets involved and how the trust is structured. Common reasons to consider one include the following.

Potential tax advantages

Certain income from inherited assets allocated to beneficiaries under 18 can be taxed at ordinary adult rates. This can be more favourable than the higher rates that otherwise apply to some income received by minors.

However, the income must qualify as “excepted trust income”. Income generated by unrelated assets added to the trust does not automatically receive the same treatment.

The Australian Taxation Office explains how income received by minors is taxed. A tax adviser can help you understand how these rules apply to your circumstances.

Asset protection

A carefully structured trust may help protect an inheritance from some of a beneficiary’s personal financial risks.

However, it does not guarantee protection against bankruptcy, relationship breakdown or legal claims. The trust’s terms, the beneficiary’s rights and their level of control can all affect the outcome.

Support for vulnerable beneficiaries

A trustee can manage funds for someone who needs assistance because of disability, addiction or mental health difficulties.

This can provide ongoing support without requiring the beneficiary to manage a substantial inheritance themselves.

You can also specify purposes for the funds, such as education, healthcare or living expenses.

Planning for blended families

Trust provisions can allow a surviving spouse to use an asset or receive income, while providing for your chosen beneficiaries to receive the remaining assets later.

These arrangements need careful drafting to balance the needs of the people involved and clearly explain how the trust should operate.

Testamentary trust costs and limitations

Including a trust in your Will usually involves more detailed drafting and higher initial legal costs. There may also be ongoing accounting costs, tax return requirements and trustee fees.

Choosing a suitable trustee is another important consideration. They must manage assets, keep records and fulfil their responsibilities under the trust. Consider whether your chosen person has the time, skills and willingness to take on that role.

Other practical issues include:

• Estate administration: A grant of probate may be needed before certain assets can be collected or transferred. However, not every estate in Queensland requires probate. Administration can take time and affect when assets become available to fund the trust.
• Privacy: If your Will is filed with the court, it becomes a public document. The trust provisions contained in it may therefore be accessible to others.
• When protection begins: The trust operates after your death. It does not protect your assets during your lifetime.

Is a testamentary trust right for your family?

The answer depends on what you want it to achieve.

The size and type of your assets matter, but so do your beneficiaries’ needs and the level of ongoing management required.

If your arrangements are straightforward, the extra costs may outweigh the benefits. If someone needs long-term support, or your family circumstances are more complex, a carefully drafted trust may be worth considering.

Legal and tax advice can help you weigh these factors before including a trust in your Will.

How GLG Legal Springfield can help

Our Wills and Estates team can explain whether a testamentary trust may suit your circumstances and help you prepare a Will that reflects your wishes.

To learn more, explore our Wills and Estates services.

To arrange an appointment, call (07) 3288 3511 or email info@springfieldlegals.com.au.