Testamentary trusts have been getting a lot of airtime lately following the 2026 Federal Budget.
In mid-June 2026, the Government confirmed that testamentary discretionary trusts will be excluded from the proposed 30% minimum distribution tax on trusts. This is welcome news for families wanting to preserve wealth and provide long-term security for future generations.
A testamentary trust may be worth considering if you:
- Have minor children or vulnerable beneficiaries.
- Have a blended family.
- Want to protect assets from future relationship breakdowns or bankruptcy (of either a spouse or adult children).
- Are concerned about how an inheritance may be managed.
- Want to create a structured, long-term legacy that can benefit multiple generations.
While tax should never be the primary driver in establishing a testamentary trust, it’s important to understand the potential benefits. Each year, the trustee has discretion to decide which beneficiaries receive income earned from investing the inheritance. This can allow income to be distributed in a tax-effective way, particularly where beneficiaries are on lower marginal tax rates.
Importantly, testamentary trusts also provide a unique tax advantage not available to other trust structures – income distributed to minor beneficiaries is generally taxed at adult marginal rates. This can allow each minor beneficiary to receive around $22,866 tax-free per year under current tax laws.
Every family is different, and the right estate planning structure will depend on your individual circumstances and long-term goals.
If you’re reviewing your Will or preparing your Estate Plan for the first time, we can help you explore whether a testamentary trust is appropriate for you.
Book a free chat with us today to discuss how we can help you to get an estate plan in place that will give you peace of mind and ensure your loved ones are taken care of.
We are experienced Wills and Estate Planning lawyers based in Prospect and work with families across Adelaide to help you put in place an Estate Plan that reflects your values and gives you confidence about the future.