Setting up a trust in your will sounds complicated, but the idea behind it is straightforward. A testamentary trust lets you pass assets to your loved ones through a structure that a trustee manages on their behalf, rather than handing everything over in one lump sum the moment you die.
For families with young children, a beneficiary who needs extra financial support, or assets that could be at risk from a relationship breakdown or bankruptcy, this kind of planning can make a significant difference to how well an estate provides over the long term. A testamentary trust is created inside a will and only comes into operation after the will-maker dies, according to the Queensland Public Trustee.
As a Springfield law firm, we help clients across Greater Springfield and Ipswich with wills, estate planning and testamentary trust arrangements.
Here is how testamentary trusts generally work in Queensland, and what to consider when deciding whether one belongs in your will.
Key takeaways
- A testamentary trust sits inside a will and starts operating at death.
- A trustee manages assets on behalf of the beneficiaries you nominate.
- Trusts can protect assets from divorce settlements and bankruptcy proceedings.
This article is general information only and is not legal advice. Every situation is different, and you should speak with a solicitor about your own circumstances.
What is a testamentary trust in Queensland?
A testamentary trust is a trust created by a will that begins operating after the will-maker dies, according to the Queensland Public Trustee. Unlike a trust set up during a person's lifetime, it has no legal existence until the will-maker passes away and the executor begins administering the estate.
The trustee named in the will takes control of the assets held in the trust and manages them for the benefit of the nominated beneficiaries. In many family arrangements the executor and the trustee are the same person, though they do not have to be. The trustee role is a serious one. Under Queensland's Trusts Act a trustee must act honestly and in good faith for the benefit of the beneficiaries, keep accurate accounts and records, and exercise the care, diligence and skill a prudent person of business would use when managing other people's affairs.
Two of the most common forms are a discretionary trust, where the trustee decides which beneficiaries receive income or capital and in what amounts, and a contingent trust, where a beneficiary becomes entitled to the assets only after meeting a set condition such as reaching a certain age, according to the Queensland Public Trustee.
When does a testamentary trust make sense in Queensland?
A testamentary trust is particularly useful in three kinds of situations, and understanding them helps to work out whether one belongs in an estate plan.
Beneficiaries who are under 18: a lump sum inheritance can be difficult for a young person to manage responsibly. A testamentary trust lets assets be held and applied for a child's benefit, covering education, health and day-to-day needs, until the trustee or the trust's own terms determine the time is right for a distribution.
Beneficiaries with limited capacity: where a family member has a disability or difficulty managing finances independently, a discretionary trust allows a trustee to make payments on their behalf over time rather than transferring a large sum they may struggle to handle.
Protection from external risks: Moneysmart notes that a testamentary trust can protect assets from divorce settlements and bankruptcy proceedings. This is because the assets remain held in the trust rather than passing directly into a beneficiary's personal estate. The protection is not automatic or guaranteed, and the degree to which it applies depends on the trust's structure and the circumstances of any claim, so legal advice is essential before relying on this outcome.
A testamentary trust is also sometimes used where a will-maker wants a family member to have the benefit of a property during their lifetime, through what is known as a life interest or a right of residence, with the asset then passing to other beneficiaries when that person dies, according to the Queensland Public Trustee.
"A testamentary trust does not replace a will. It sits inside one, and it only works if the will itself is properly drafted and executed."
Jade Kickbusch, Principal, Brookwater Legal
What types of testamentary trust are used in Queensland?
- › Discretionary trust: the trustee chooses who among the nominated beneficiaries receives income or capital, and in what amounts and at what times. This flexibility is one of the trust's most practical features.
- › Contingent trust: a beneficiary becomes entitled to the assets only after satisfying a condition the will specifies, such as reaching a nominated age. The assets are held and managed until that condition is met.
- › Life interest: the primary beneficiary receives the full benefit of an asset, such as the family home, for their lifetime without inheriting it outright. When they die the asset passes to the remainder beneficiaries named in the will.
- › Right of residence: a person may live in a property for life, or for a set period, without receiving ownership of it. The asset ultimately passes as the will directs.
All four types are described by the Queensland Public Trustee. Each suits different family circumstances, and more than one can operate within the same will.
How does a testamentary trust work in Queensland?
Step 1: Talk to us
Get in touch and we will explain how testamentary trusts generally work and whether one is likely to suit your estate planning goals.
Step 2: Review the estate and the beneficiaries
We look at the assets in the estate, who the intended beneficiaries are and what their circumstances suggest about how a trust should be structured, including whether a discretionary or contingent arrangement is more appropriate.
Step 3: Draft the will with the trust provisions
We prepare a will that includes the trust provisions, naming the trustee, the beneficiaries, the assets to be held in trust, and the terms on which distributions can be made. The will must be executed correctly to be valid, with two witnesses present when it is signed, per the Queensland Public Trustee.
Step 4: Administer the trust after death
Once the will-maker dies and the executor has administered the estate, the trustee takes responsibility for the trust assets. We can assist the trustee to understand their wills and estates obligations and, where appropriate, to wind up the trust in accordance with its terms.
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When does a testamentary trust not apply to a situation?
A testamentary trust is not the right tool for every estate. There are several situations where it adds complexity without meaningful benefit.
Where the entire estate passes to a capable adult who is in a stable financial position and faces no foreseeable external risks, a straightforward gift in a will often achieves the same outcome without the administrative burden of a trust. A trustee has ongoing obligations under Queensland's Trusts Act, including keeping accurate records for at least three years after the trust ends, and that work carries a cost.
Assets that do not pass through a will at all are also outside the reach of a testamentary trust. Superannuation is the most common example. A superannuation fund pays a death benefit according to the member's nominated beneficiary or the fund's own rules, not under the will, according to Moneysmart. A property held as joint tenants similarly passes directly to the surviving owner and is not governed by the will, according to Queensland Courts. Neither of these assets can be placed into a testamentary trust unless the death benefit or the property interest first passes into the estate itself.
Finally, a testamentary trust cannot override a family provision claim. Under Queensland's Succession Act, an eligible person such as a spouse, child or dependant may apply to the Supreme Court of Queensland for adequate provision from an estate, whether or not assets are held in a trust. The trust structure does not put assets beyond the reach of such a claim in every case.
What does a trustee have to do in Queensland?
Core duties under Queensland's Trusts Act include:
- › Act honestly and in good faith: a trustee must always act for the benefit of the beneficiaries and must not let personal interests conflict with that duty.
- › Exercise prudent care: a trustee who is not a professional must use the care, diligence and skill a prudent person of business would use when managing the affairs of other people, according to Queensland's Trusts Act.
- › Keep accurate records: accounts and records must be maintained for at least three years after the trust ends, according to Queensland's Trusts Act.
- › Avoid conflicts of interest: the Queensland Public Trustee notes that a trustee must not allow personal interests to conflict with a beneficiary's interests and is liable for any loss caused by a breach of this duty.
Choosing the right trustee matters as much as choosing what goes into the trust. A person who is organised, financially capable and able to remain impartial between beneficiaries will generally serve the trust well over time.
Frequently Asked Questions
What is the difference between a discretionary and a contingent testamentary trust in Queensland?
In a discretionary trust the trustee decides who receives income or capital and when, according to the Queensland Public Trustee. In a contingent trust a beneficiary becomes entitled only after meeting a stated condition, such as reaching a certain age.
Does a testamentary trust in Queensland cover superannuation?
Generally not. Superannuation is paid according to a binding nomination or the fund's own rules, not under the will, according to Moneysmart. It can only flow into a testamentary trust if the death benefit is first directed into the estate.
Who can be a trustee of a testamentary trust in Queensland?
Any adult with the capacity to manage financial affairs can be named as trustee, including a family member, a professional adviser or the Queensland Public Trustee. The trustee owes duties of care and honesty to the beneficiaries under Queensland's Trusts Act.
Can a family provision claim in Queensland reach assets held in a testamentary trust?
A testamentary trust does not automatically place assets beyond the reach of a family provision claim. Under Queensland's Succession Act an eligible person may apply to the Supreme Court of Queensland for provision from the estate, and the trust structure does not prevent that in every case.
Does jointly owned property in Queensland pass into a testamentary trust?
Property held as joint tenants passes automatically to the surviving owner and is not governed by the will, according to Queensland Courts. It cannot be placed into a testamentary trust unless the deceased's interest first passes into the estate.
Do you need a solicitor to set up a testamentary trust in Springfield or Ipswich QLD?
A solicitor drafts the will and the trust provisions within it, ensuring the trust operates as intended and that the trustee understands their obligations. Legal advice also helps identify whether a testamentary trust suits the estate's specific circumstances.
When does a testamentary trust in Queensland come to an end?
The trust ends according to the terms set out in the will, such as when a beneficiary reaches a nominated age, when all assets have been distributed, or when the purpose of the trust has been fulfilled. The trustee winds it up in accordance with those terms.
Your Next Steps
A testamentary trust can be a practical way to provide for the people who matter most, particularly where beneficiaries are young, need ongoing support or face circumstances that make a direct inheritance less suitable. For families in Greater Springfield and Ipswich, getting the estate planning right from the beginning means fewer complications for trustees and beneficiaries later.
If a testamentary trust is on your mind, the next step is a straightforward one. Get in touch with the Brookwater Legal team or call (07) 3437 8555, and we'll talk you through how the process generally works.
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External Resources
Brookwater Legal · This article contains general information only and does not constitute legal advice. It does not take into account your individual circumstances. You should obtain legal advice about your own situation before acting on anything in this article. Liability limited by a scheme approved under Professional Standards Legislation.
