If you have children, it is recommended you make a Will.
Anyone over the age of 18 with mental capacity can make a will. In some cases, people under 18 may make a will if they are married or have a court order permitting it.
Benefits of a Will
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Ensures your assets go to the people or causes you choose.
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Allows you to appoint a guardian for minor children.
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Lets you specify funeral and other personal wishes.
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Reduces the risk of family disputes.
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Can help minimise legal costs and delays for your loved ones.
If you die without a valid will (known as dying intestate), state laws decide who receives your estate. This may not reflect your wishes and can sometimes exclude important people in your life, such as stepchildren or long-term partners
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Testamentary Discretionary Trust Will is different to a Standard Will
Testamentary Discretionary Trust Will is not to be confused with a Family Trust, although operate slightly similar. Whilst Family Trusts are created and activated during the life of a person, a Testamentary Discretionary Trust Will becomes activated after you die and is created under your Will.
These trusts are designed to hold and manage all or part of the deceased’s assets for the benefit of nominated beneficiaries, with significant flexibility and control given to the trustee.
Key Features:
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Created by Will: The trust is established according to the terms set out in the will and only comes into existence after the will-maker’s death.
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Discretionary Nature: The trustee has the power to decide which beneficiaries receive income or capital from the trust, in what amounts, and at what times, within the class of eligible beneficiaries specified in the will.
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Potential Beneficiaries: Typically include the primary beneficiary (such as a child), their spouse, children, grandchildren, and sometimes other relatives or related entities.
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Trustee: Can be a family member, friend, professional, or trustee company. The trustee is responsible for managing the trust assets and making distribution decisions in accordance with the will’s terms.
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Appointor: Some testamentary discretionary trusts also nominate an appointor, who has the power to appoint or remove the trustee.
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Trust Assets: May include cash, investments, property, and other valuable belongings.
How It Works:
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Upon the will-maker’s death, the executor applies for probate.
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The trust is then established, typically by opening a bank account in the trust’s name and transferring estate assets into it.
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The trustee manages the assets and exercises discretion over distributions to beneficiaries, as allowed by the will.
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The trust can last up to 80 years, or for a shorter period if specified.
Advantages:
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Asset Protection: Assets held in the trust are generally protected from beneficiaries’ creditors, bankruptcy, or family law claims.
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Tax Flexibility: The trustee can distribute income in a tax-effective way, including to minor beneficiaries who may benefit from tax-free thresholds not available with other trusts.
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For example, Income Splitting - the trustee can distribute income among a wide range of potential beneficiaries (e.g., children, grandchildren, spouses), which can reduce the overall tax burden for the family.
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Tax-Free Threshold for Minors: Income distributed from a testamentary trust to minors is taxed at adult rates, allowing each minor to access the full tax-free threshold (currently $18,200), which is not available for minors receiving income from other types of trusts
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Capital Gains Management: Capital gains can be distributed to beneficiaries with lower incomes, potentially reducing the amount of tax paid on those gains.
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Stamp Duty: Stamp duty is not payable on the creation of this Trust, and the property under the Will transferred into the Trust is exempt from stamp duty.
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Land Tax: Trustees can access land tax concessions which is tax effective.
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Protection for Vulnerable Beneficiaries: The trust structure can safeguard assets for beneficiaries who are minors, have disabilities, or are otherwise vulnerable.
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Control: The will-maker can set rules and appoint trusted individuals to manage the assets for the benefit of their family.
Ongoing Administration Costs:
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Accounting Fees: Annual costs for accounting and tax compliance generally range on average from a few hundred dollars to just over a thousand, depending on the complexity and the accountant’s fees. More complex trusts (e.g., those with significant investments or loans) may incur several thousand dollars in annual fees. These fees will vary and are not exact.
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Other Administrative Costs: There may be additional costs for legal advice, financial management, and compliance, especially if the trust holds diverse or high-value assets.
Comparison to Simple Wills:
FeatureSimple WillTestamentary Discretionary Trust WillAsset distributionDirect to beneficiariesHeld in trust, distributed at trustee’s discretionAsset protectionLimitedStrong protection from creditors, family law claimsTax advantagesLimitedIncome splitting, tax-effective distributionsFlexibility for beneficiariesLowHigh, can tailor distributions to needsSummary
A testamentary discretionary trust will in Victoria is a sophisticated estate planning tool that allows assets to be managed and distributed flexibly and tax-effectively, while offering asset protection for beneficiaries. The trust is created by the will, comes into effect after death, and is managed by a trustee who has broad discretion over how and when beneficiaries receive benefits
They are most beneficial for larger or more complex estates where the advantages outweigh the administrative burden and if you have minor children. However it is always best to discuss with a lawyer to enable appropriate legal advice specific to your circumstances.
This information is general in nature.
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Joint assets and assets held in Family Trusts/Companies are not included in this type of trust, however only sole assets owned by you can pass into a Testamentary Trust.
Further, superannuation and life insurance do not automatically form part of an estate.
Assets held jointly or in other entities (such as existing Family Trusts and companies) do not pass into the Testamentary Trust.
It’s important to review and update your will regularly, especially after major life events such as marriage, divorce, the birth of children, or significant changes in assets.
Including a guardianship clause in your will allows you to nominate a person (or people) to care for your minor children if you die before they reach adulthood. This is a crucial aspect of estate planning for parents, ensuring your wishes regarding your children’s care are clear and legally documented.
How Guardianship Works in Victoria
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Nomination in a Will: You can nominate anyone over 18 years of age as the preferred guardian for your children in your will, provided they consent to the appointment.
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Legal Effect: The appointment of a guardian in your will (often called a testamentary guardian) expresses your wishes but is not automatically legally binding. If both parents are deceased, or the surviving parent is unable or unwilling to care for the children, the nominated guardian can apply to the Supreme Court or Family Court for formal parental responsibility.
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Court’s Role: The Court considers your wishes but will ultimately decide based on the best interests of the child. If there are disputes or competing claims, the Court will determine who should have parental responsibility.
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Permanent Care Orders: In Victoria, the Children’s Court can make a permanent care order, granting parental responsibility to the nominated guardian until the child turns 18.
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Joint Guardians: You can appoint more than one guardian, but it’s important to consider whether joint guardians can cooperate effectively.
What Guardianship Covers
A testamentary guardian may be responsible for:
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Deciding where the child lives and who they live with.
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Making decisions about the child’s education, health care, and religious upbringing.
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Managing the child’s property and finances (if specified in the will or by court order).
Important Considerations
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Consent: Always discuss your intentions with the proposed guardian to ensure they are willing and able to take on the role.
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Surviving Parent: If a child’s other parent is alive and has parental responsibility, they will usually continue to care for the child. The guardianship appointment typically only takes effect if both parents are deceased or unable to care for the child.
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Court Discretion: The Court has the final say and will consider the child’s best interests, existing parenting orders, and the suitability of the nominated guardian.
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Successor Guardians: It is advisable to nominate an alternate (successor) guardian in case your first choice is unable or unwilling to act.
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Be in control of your assets even when you are not here
If you die intestate, your estate is distributed according to a legal formula based on your family relationships. This may mean your assets go to relatives you did not intend to benefit, and people like stepchildren or long-term partners may miss out unless they make a legal claim
Wills and Estate Planning
Given the complexity and legal requirements for a valid will, it is strongly recommended to seek professional legal advice. A lawyer can ensure your will is valid, clearly expresses your wishes, and minimises the risk of disputes or challenges.
If you need assistance with preparing or updating a will, or with broader estate planning such as Powers of Attorney / Advanced Care Directives contact our experienced team for tailored advice and peace of mind.
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