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A testamentary trust is established within a person’s last will and testament. It’s a way for grandparents and parents to safeguard all or part of their assets for the benefit of their descendants. This enables them to provide for the future of their children, grandchildren, and the generations to come. Other than that, their descendants are also granted significant advantages when it comes to the tax system and wealth creation.

The Benefits of a Testamentary Trust

There are three advantages of using a testamentary trust. First, the trust itself protects the bequeathed assets from third-parties or from any financial difficulties that beneficiaries may face along the way. All the assets are legally owned by the trust, not the beneficiaries. Hence, it’s able to protect them from legal action, litigation or bankruptcy. Let’s say a beneficiary owes some creditors money. Those creditors won’t be able to access assets through a testamentary trust.

Second, a testamentary trust offers greater control over assets. This means a trustee can distribute capital and income gains or dividends on shares to all the beneficiaries each year using the most tax-effective ways. For instance, beneficiaries who have children under the age of 18 may receive up to $18,200 of tax-free income each year. That’s something you can’t achieve with a family trust.

Finally, trustees are able to distribute income or assets to nominated beneficiaries at any time and in any proportion. Whether they need to pay for a new car or university fees, they can have the resources they need through the trust.

Testamentary Trust Vs. Family Trust

A family trust can be created within a person’s lifetime. The terms and conditions established within this type of trust are set up by way of a deed. As for a testamentary trust, it must be in a clause in someone’s will. Upon that person’s death, the will creates a trust.

That means the trust will hold all the assets of the deceased. These assets can then be distributed to beneficiaries who are under the age of 18. As already mentioned, minors can receive tax-free income each year. However, for a family trust, the successors nominated who are still minors don’t have the same advantage.

Other than that, the testamentary trust provides more control and flexibility over the bequeathed assets. That should help surviving parents cope with the pressure of raising their kids as the sole financial provider for the household. With such flexibility, executors of the will can also give distributions other family members who may need financial support. They can lend money without interest.


Set up your finances while you can. So you have the power to arrange your trust in the way you wish and look after your family even if you’re no longer with them.

If you’re like me and are interested in learning how to set up your own testamentary fund, feel free to put your details down and our experts will be able to assist you.