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Post-death testamentary trust for a minor beneficiary

We set up the trust before the estate is distributed, so a child's inheritance is still there when it is needed.

When a will leaves assets to children, the default position is that they take full and unconditional control at 18. On a significant estate that means a young adult with no financial experience holding several hundred thousand dollars, with no structure around it, nobody to consult, and no protection from decisions they have not lived long enough to make well. A testamentary trust changes that. Set up properly, it holds and invests the inheritance, pays for education, health and living costs along the way, and keeps the capital intact until the person it was meant for is actually ready for it.

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Capital held until they are ready

The inheritance stays intact past the eighteenth birthday, while trustees can still meet genuine needs for education, health and housing along the way.

Concessional tax treatment preserved

The structure is established inside the window the tax rules require. Income can then be taxed at adult rates rather than at the penalty rates that apply to a minor's direct inheritance.

A deed trustees can actually use

The terms are drafted so trustees can respond to a child's changing circumstances over fifteen years without going back for a variation.

What is a post-death testamentary trust for a minor beneficiary?

It is a trust set up during the administration of a deceased estate to hold and manage a share for a beneficiary who is still a child. Instead of the inheritance being paid out to them or held informally until they turn 18, the assets go into the trust, and trustees invest them and make distributions for the child’s education, health and welfare until the time the deed sets for handing over the capital. It is established as part of the administration, which is why it has to be dealt with before the estate is distributed rather than afterwards.

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What is a testamentary trust?

A trust that takes effect on death and holds a beneficiary’s inheritance rather than paying it out to them. It is the usual way of protecting a child’s share until they are old enough to manage it. It also keeps some structure around the money after that.

What are the tax advantages for a child?

The minors’ tax rules in the Income Tax Assessment Act do the work here. Income a child receives from a testamentary trust funded out of the estate can be taxed at adult marginal rates. The tax-free threshold is available too. A direct inheritance does not get that treatment, and the investment income is taxed at penalty rates instead.

When does the child get control of the capital?

Whenever the deed says. It does not have to be 18, and it does not have to be a single handover. Deeds commonly stage access across several ages, or tie it to milestones, with trustee discretion to bring things forward for a genuine need.

Can one trust cover several children?

Yes, and sometimes that is the better answer. A single trust can hold for several beneficiaries, or a separate trust can be established for each child. Which one suits depends on the assets and on how different the children’s circumstances are.

Children inheriting from an estate?

We design and establish testamentary trusts for minor beneficiaries, from the structure and the tax position through to vesting the inheritance out of the estate.

The money has to last longer than the eighteenth birthday

A child who inherits directly takes control at 18, whether or not they have any experience of managing money, and there is no mechanism to slow that down after the fact. Held outright, an inheritance meant to provide decades of security is routinely spent in a few years. And the tax treatment works against you too, because investment income on a minor’s direct inheritance is taxed at penalty rates rather than at adult rates.

We will review the estate and advise on the right structure for the beneficiaries.
We will prepare the testamentary trust deed and its supporting documentation.
We will confirm the tax position, including any superannuation proceeds.
We will advise on trustees, investment mandate and distribution arrangements.
We will establish the trust and vest the inheritance into it from the estate.

Is this your situation?

You are an executor, a family member or an adviser, and the estate has beneficiaries who are children. They are entitled to inherit, but they are either far too young to receive anything now or they will turn 18 well before anyone who knows them would hand them that much money. The deceased may have wanted a trust and never got the documents done. The will may leave the structure to your discretion. You know there are real tax consequences either way, you know the inheritance could be badly eroded if it goes out directly, and you know the decision you make now will shape these children’s position for years. The rules are unfamiliar and the options are not obvious from the outside.

What's included in your testamentary trust service

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Trust structure design for the estate and the beneficiaries.
Testamentary trust deed preparation.
Tax advice, including the treatment of superannuation proceeds.
Investment mandate and distribution framework.
Establishment of the trust and vesting from the estate.

What an unstructured inheritance does

An 18-year-old who inherits outright is exposed, and usually not to anything dramatic. The risk is ordinary: lifestyle, relationships, a business idea from a confident friend, and financial decisions made without the experience to see where they end.

The tax system compounds it. Investment income on a minor’s direct inheritance is taxed at penalty rates, where income from a properly structured testamentary trust can be taxed at adult marginal rates with the tax-free threshold available. And the window closes: once the estate has been distributed, the chance to put the protection in place has gone, because the trust is established out of the administration rather than out of the beneficiary’s own money. An inheritance meant to provide decades of security can be exhausted in a few years, and there is nothing left to rebuild it from.

How we build the structure

We start with the estate and with the children: their ages, what the assets actually are, and what the family wants the inheritance to do. The structure follows from those facts rather than from a precedent deed with the names changed.

We prepare the trust deed, the investment mandate and the supporting documentation, and we advise on who the trustees should be and how decisions get made, so the trust runs properly from the first distribution rather than from the first problem. We also deal with the tax position while it can still be dealt with, including the requirements that attach to superannuation proceeds. The result holds the inheritance, meets the children’s real needs along the way, and keeps the capital intact until the person it was built for is ready for it.

Three steps to a trust that holds

From the estate as it stands to an inheritance that is protected.

Design the structure

We review the estate, the assets and each child's circumstances, and settle the structure and the tax position before anything is drafted.

Draft the deed

We prepare the trust deed, the investment mandate and the supporting documents, and advise on trustees and how decisions are made.

Establish and vest

We establish the trust and transfer the inheritance into it from the estate, correctly and before the distribution.

Lawyers who design the structure around the actual family

Being responsible for a child’s financial future when the person who wanted to provide for them is no longer here to decide anything is a genuine weight, and it is not one you asked for. What makes it heavier is that the decision is close to irreversible in both directions.

We have established testamentary trusts for families across Australia, holding everything from a family home kept for young children through to business interests and investment portfolios. We know what the tax rules require for the concessional treatment to be available, what a deed has to say for trustees to be able to act sensibly ten years from now, and where trusts drafted from a template fall down. The wealth was built with a particular person in mind. The structure is how it reaches them.

Our great lawyer guarantee

Six principles we hold to, whatever you bring us and however long it takes.

Take the time

We listen carefully to understand what you want to achieve, then step you through the advice and the documents.

Share our knowledge

We pass on as much as we can, so you can make your own informed decisions.

Stick to our knitting

We only do what we are good at, so you never pay for our learning.

Work as one team

Someone is always available to answer your question or point you the right way.

Fair pricing

A fixed or capped quote for advice and documents, so you do not carry the price risk.

It is your show

We are in it for a front row seat to witness your success, not for our egos.

Has the estate not been distributed yet?

Tell us what the estate holds and how old the children are. We will advise on the structure that fits, confirm the tax position, and get the deed drafted while the option is still open.

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