Estate planning isn’t just about putting together a Will, although it's incredibly important. 

For many, using a Will alongside a testamentary trust can give you extra protection and flexibility. This can be especially helpful if you have dependents, valuable assets or want to make sure your estate is managed efficiently in terms of tax, creditor protection or family matters. According to the Australian Bureau of Statistics (ABS) about 17% of children in Australia live in blended or step-families; meaning financial situations can get complex, offering a way of reducing the potential confusion can remove friction after you pass. 

Essentially, it’s about making sure your wishes are carried out while giving your loved ones added security and peace of mind.

In this article, we’ll explain:

• What a Will is vs what a testamentary trust is
• What does a conveyancer or legal advisor / estate lawyer do in relation to Wills and trusts
• The benefits and trade-offs of each
• How to decide which option might suit your circumstances

Already ready to make a Will and testamentary trust? Contact a professional Will writer with Bark today!

What is a Will?

A Will is a legal document that says what should happen to your money, property and belongings after you die. Breaking down the parts, a Will: 

• Spell out exactly how you want your assets (like property, money and personal items) to be distributed after you pass away. 
• Names an executor, who is the person responsible for handling your estate, making sure bills are paid and that your wishes are followed. 
• Appoint guardians to care for any minor children (a child under the age of 18), your Will can give you peace of mind about their future. 
• Include any special instructions, like how you’d like your funeral handled, particular gifts to friends or family, or even directions for setting up trusts. 

When you pass away, your Will goes through probate or the equivalent process in your state. Debts and taxes are settled, and then the remaining assets are distributed to your beneficiaries exactly as you’ve laid out. A Will is usually a straightforward, effective solution for many estates, particularly if your wishes are clear, your family situation is uncomplicated and you don’t need detailed controls over how your inheritance is managed.

So, what is a testamentary trust? 

A testamentary trust is a trust that is created by a Will, but it only starts after the person who made the Will dies. It doesn't operate while you’re alive.

A testamentary trust is sometimes called a ‘Will trust’ or ‘trust under a Will’. 

Basically, your Will includes instructions that, when the time comes, certain assets or portions of your inheritance should be held in a trust. A trustee is someone who you appoint or a professional who manages these assets on behalf of your chosen beneficiaries. 

This can give added control over when and how your assets are distributed, protecting your beneficiaries from creditors and sometimes offer tax advantages, making it a flexible tool for families with dependents or more complex estates. For minors (under 18), income from a testamentary trust can be taxed at adult marginal rates (i.e., benefit of tax-effective distribution) whereas income from an inter vivos trust given to a minor may face 'penalty' rates.

Key features include:

• The trustee you appoint (or court-appointed) manages assets, pays income and makes distributions to beneficiaries according to the terms you set.
• Beneficiaries do not immediately own the assets outright; they receive benefits under conditions or as income.
• The trust can last for years (depending on your Will and the law).
• It offers control, protection and (often) tax planning benefits.

Since the trust only comes into play after you pass away, it has to go through the legal estate or probate process before it’s ‘activated’.

Testamentary trust vs Will: The core differences

When deciding between a simple Will and a testamentary trust, it helps to understand how each one actually works in practice. While both outline what happens to your assets after you pass away, they differ in how much control, protection and flexibility they offer your beneficiaries. 

Here’s a quick breakdown of the key differences between the two:

Because of these differences, lots of estate planners suggest using a Wll and a testamentary trust for people with more complex situations (like kids, blended families, bigger estates or potential creditor issues).

What does a lawyer, estate planner or solicitor do in relation to Wills & testamentary trusts

Qualified legal professionals (lawyers, solicitors, estate planning specialists) play a crucial role in getting all this right. Here’s what a lawyer does when drafting or advising on wills and testamentary trusts:

Review your circumstances.

Understand your assets, family structure, beneficiaries, tax position and goals (e.g., protecting vulnerable beneficiaries, controlling distributions, minimising tax).

Advise whether a testamentary trust is appropriate.

They can weigh whether the added complexity and cost is justified for your estate.

Draft the Will with correct trust clauses.

The trust terms must be valid, legally enforceable, clear and aligned with your intentions.

Nominate and advise trustees.

Assist you in selecting trustworthy individuals or entities to act as trustees, and define their powers and responsibilities.

Ensure legal formalities are met.

Signing, witnessing and ensuring the Will is valid under state law.

Provide guidance on taxation and compliance.

Trusts have tax reporting obligations, capital gains implications, income splitting rules, record-keeping and legal compliance; lawyers guide you through all of this.

Support executors and trustees after death.

When you pass away, they may help executors to probate the Will, establish the trust, prepare trust tax returns and advise trustees on distributions.

That’s why it’s a good idea to get help from an experienced estate lawyer when setting up a Will with a testamentary trust. They can make sure everything’s structured properly and help you avoid any future tax headaches or family disputes.

What are the pros and cons of a testamentary trust?

Pros

• Tax flexibility: One of the biggest perks of a testamentary trust is how flexible it can be when it comes to tax. The trustee can split income between beneficiaries who are in lower tax brackets, which can mean big savings over time. Even kids can get the benefit of adult tax rates on income from the trust, which isn’t possible with most other types of trusts.
• Protection from liabilities: Because the trust technically owns the assets (not the beneficiaries directly), those assets are better protected from things like creditors, bankruptcy or even relationship breakdowns. So, if your child or another beneficiary ever faces financial trouble or divorce, the trust can help keep their inheritance safe.
• Control over distributions: A testamentary trust lets you stay in control even after you’re gone. You can set specific conditions on how and when beneficiaries receive money. For example, only after turning 25, finishing university or reaching certain life goals. It’s a great way to make sure funds are used wisely and not all spent at once.
• Support for minors or vulnerable beneficiaries: If you’ve got young kids or family members who may need help managing money, a trust can make sure they’re financially supported in a structured way. Instead of handing over a large lump sum, the trustee can release funds gradually for things like education, healthcare or living expenses.
• Estate planning flexibility: A testamentary trust can also work neatly alongside other parts of your estate plan, like superannuation, life insurance or family trusts you’ve set up while alive. It helps create a smoother, more strategic plan for managing and passing on wealth.

Cons

• Higher complexity and cost: Setting up a testamentary trust isn’t as simple (or cheap) as writing a straightforward will. You’ll need a lawyer who understands trusts, and once it’s up and running, there’ll be ongoing costs for things like annual administration, trustee accounting and tax returns. 
• Trustee risk: The trustee plays a big role here. They’re legally responsible for managing the trust’s assets properly and in line with the will’s instructions. That means they carry what’s called “fiduciary duty,” which basically means they must always act in the best interests of the beneficiaries.
• Reduced liquidity or flexibility: Once assets are placed in a testamentary trust, it’s not as easy to make big changes. Depending on how the will is written, some assets may be locked into the trust structure, which can limit flexibility later on.
• Ongoing compliance burden: Running a trust comes with paperwork, and plenty of it. trustees need to keep detailed financial records, file tax returns every year and make sure everything is done in line with the trust’s terms.

Because of this, for smaller estates or simple family situations, a straightforward will may be more practical. Many estate planning lawyers stress that the benefits must outweigh the extra cost and complexity.

How to use a will & testamentary trust together

For many people, the smartest approach isn’t choosing between a will or a testamentary trust; it’s using both. Here’s how it usually works in practice:

1. You start with a will as your main estate planning document. This sets out the basics: who gets what, who your executor is and any key wishes you want to include.
2. Within that will, you can include specific clauses that create one or more testamentary trusts. These might apply to certain parts of your estate. For instance, your family home, investment portfolio or the inheritance you want to leave for your children or grandchildren.
3. When you pass away, the will is executed and your assets are distributed. Some assets will go directly to beneficiaries, while others will be placed into a trust, where they’ll be managed by a trustee according to your instructions.

This kind of hybrid setup gives you the best of both worlds: the simplicity and clarity of a will, combined with the added protection and flexibility of a trust. It’s especially useful if you want to support younger family members, protect assets from creditors or simply make sure your legacy is handled carefully over time.

Summary

The key difference in a testamentary trust vs a will lies in control, protection and tax planning. A simple will distributes assets directly, whereas a will with a testamentary trust holds assets under a trustee, with rules and discretion for distribution.

Choosing between them or combining them depends on your family, financial goals and risk profile. A knowledgeable estate planning lawyer (or solicitor) is essential to get the structure right and to ensure your wishes are legally enforceable.