Your Will might be doing less work than you think.
Financial freedom means something different to everyone — for some it’s building generational wealth, for others it’s simply knowing the people they love are taken care of. Either way, having the right structures in place matters more than most people realise.
One worth knowing about is the Testamentary Trust. this is a trust created through your Will that only comes into effect after you pass away. Unlike a standard Family Trust set up during your lifetime, a Testamentary Trust allows your assets to be managed by a trustee for your chosen beneficiaries, with real protection against divorce, bankruptcy, or creditor claims that might otherwise erode what you’ve spent years building.
So, What Exactly Is a Trust?
A trust is a legal structure used to hold and manage assets — property, shares, businesses, or cash — for the benefit of others. There are three key parties involved:
- The Settlor establishes the trust
- The Trustee is the person or company that controls and manages the trust’s assets
- The Beneficiaries are those who receive income or assets from the trust
A simple example: a family places an investment property into a trust. The trustee manages the property, collects rent, and distributes income to the beneficiaries according to the trust deed.
Not All Trusts Are the Same
Because everyone’s situation is different, there are several types of trusts available, each serving a distinct purpose.
Family Trusts (Discretionary Trusts) are by far the most common. Typically set up for family members or small businesses, they allow flexible income distribution to beneficiaries with no fixed entitlement — which makes them useful for both estate planning and asset protection.
Fixed Trusts offer less flexibility. Beneficiaries have predetermined rights to both income and capital, with less discretion left to the trustee.
Unit Trusts are often used when investors aren’t related. Beneficiaries hold units rather than a direct entitlement, though changes in ownership can carry tax implications.
Special Disability Trusts are designed specifically to provide for the future care and accommodation needs of a person with a severe disability. For families in this situation, they can offer genuine peace of mind about what happens when you’re no longer around.
Testamentary Trusts are created through your Will and only come into existence after you die — which is why they’re worth understanding properly.
Why Testamentary Trusts Matter More Than Ever
Following the Federal Budget announcement on proposed changes to the taxation of Discretionary Trusts, a lot of people have been asking whether trusts still offer meaningful benefits. The short answer is yes — and in some cases, Testamentary Trusts may actually become more attractive as a result.
The proposed 30% minimum tax on Discretionary Trusts is not intended to apply to Testamentary Trusts. The Government has indicated that, to qualify for this exemption, a Testamentary Trust must be established for “genuine testamentary purposes.” Further guidance on how this will be interpreted is still to come, but early commentary suggests that trusts with beneficiaries limited to individuals and income tax-exempt entities are more likely to meet the test.
What this means practically: if you already have a Will, now is a good time to review whether a Testamentary Trust should be part of your estate plan. And if you already have Testamentary Trusts in place, it’s worth checking whether they need updating in light of these proposed changes.
The Cost of Doing Nothing
Estate planning has a way of sitting at the bottom of the to-do list. The cost of drafting a Will, the time it takes, the conversations it requires, these are all real barriers. But dying without a Will doesn’t just create financial complications. It places an enormous emotional burden on the people you care about most.
While they’re grieving, they may also be left to navigate the administration of your estate without any clear direction creating unnecessary stress, uncertainty, and in some cases, family conflict that could have been avoided entirely.
Financial freedom isn’t only about accumulating wealth. It’s about having confidence that what you’ve built will be protected and passed on the way you intended. That’s worth taking seriously, regardless of where you are in your financial journey.
Your Next Step
If you’re not sure whether your current estate planning still reflects your wishes — or if you’ve never had anything in place at all, this is a good moment to start the conversation.
Reach out to your solicitor or speak with a financial adviser to explore whether a Testamentary Trust is right for your situation. It doesn’t need to be complicated. It just needs to be done.
This article has been prepared for general informational purposes only. It does not take into account your personal objectives, financial situation, or needs. It is recommended that you seek financial product advice before making any decision on a financial product. Fowlers Group advisers are available to assist you in understanding your options.
.
