A Testamentary Trust Will includes a discretionary trust created within the Will.

A Testamentary Trust is very similar to a Family Trust. The main difference is that a Testamentary Trust is created after your death (pursuant to your Will), whilst a Family Trust is created whilst you are alive pursuant to a Trust Deed. A Family Trust operates during your lifetime and therefore you are able to exercise some control over it.
A Testamentary Trust comes into existence on your death and accordingly the only control you can exercise over the Trust will be limited by your Will.

Creating a Testamentary Trust within your Will can sometimes provide for a more effective strategy to leave assets to a person rather than make the gift directly. Download our brochure “Understanding Testamentary Trust Wills”

A popular fear or misconception amongst Will makers, is that their estate may unwittingly pass to the benefit of a child’s spouse or partner in the event of a breakdown of relationship.

The powers of the Family Court are quite broad. However, it may be possible to reduce the ability of your inheritance being split between a separating couple if, instead of giving your child a direct gift in your Will, you provided for them via a Testamentary Trust.
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The risk of being sued, particularly for those persons whose trade makes them vulnerable (doctors, lawyers, accountants, sole traders etc) is ever present and usually results in them not owning any assets in their sole name.
If a beneficiary experiences financial difficulties and receives a windfall from your estate it is possible that your gift can be attacked by creditors.

With a Testamentary Trust the trustee determines who receives the income and/or capital of your estate and can decide what (if anything) to pay to a bankrupt beneficiary.
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On occasions Will makers wish to benefit someone who suffers from an intellectual handicap or perhaps suffers from a significant drug or alcohol dependency.

Rather than providing a direct gift to them, which may be squandered or mismanaged or otherwise not able to be handled, you may provide for their benefit through a Testamentary Trust where your appointed trustees remain in control.
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One of the most significant advantages to establishing a Testamentary Trust within your Will is that your trustee has powers to maximise the benefit your whole family from your assets taking into consideration greater tax burdens which some beneficiaries might face.

Tax must be paid on any income or interest earned from investments in a deceased estate at the beneficiary’s own marginal tax rate.
For example if interest of $40,000 is earned through investments made from estate monies valued at $500,000 a beneficiary spouse may pay tax on that interest of $6,600.

However, if the same amount of interest was earned via a Testamentary Trust and split amongst several beneficiaries, including minor children, then it is possible to avoid payment of tax. That saving would occur in each and every year the investment is maintained.