{"id":18798,"date":"2026-10-21T14:22:28","date_gmt":"2026-10-21T03:22:28","guid":{"rendered":"https:\/\/chuatan.com.au\/?p=18798"},"modified":"2026-10-21T14:22:28","modified_gmt":"2026-10-21T03:22:28","slug":"testamentary-trust-vs-family-trust-vs-will","status":"publish","type":"post","link":"https:\/\/chuatan.com.au\/en\/testamentary-trust-vs-family-trust-vs-will\/","title":{"rendered":"Testamentary Trust vs Family Trust vs a Simple Will: Which Suits You?"},"content":{"rendered":"
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Families with property, a business or investments often hear three options for passing on wealth: a simple Will, a Will with a testamentary trust, or a family (discretionary) trust set up during their lifetime. For Asian families with children in Australia, grandchildren overseas or a family business, the choice matters for tax, protection and control.<\/p>\n

These are not alternatives in every sense. A family trust works alongside a Will and does not replace it. This article explains what each one is, how they compare and when each tends to suit.<\/p>\n\n

What each one is<\/h2>\n

A simple Will<\/h3>\n

A simple Will leaves assets directly to beneficiaries: “my estate to my children in equal shares”. Once the estate is administered, each child owns their share outright. It is clear, cheap to administer and easy to understand.<\/p>\n

A testamentary trust<\/h3>\n

A testamentary trust is created by your Will and comes into existence only after your death. Instead of giving a child their share outright, the Will gives it to a trustee (often the child) to hold for a group of beneficiaries, such as the child, their spouse, children and grandchildren. Each year the trustee decides who receives income and capital. Many Wills give each child the option of taking their share outright or through their own trust.<\/p>\n

A family trust<\/h3>\n

A family (discretionary) trust is set up by a deed during your lifetime. Assets are transferred to or acquired by the trustee, often a family company, and the trustee distributes income among family beneficiaries each year. The trust does not end on your death. What matters for succession is who controls it afterwards, which is governed by the trust deed (through the appointor or guardian role), not by your Will.<\/p>\n\n

Tax for minor children<\/h2>\n

This is the best-known difference. Unearned income paid to children under 18 is usually taxed at high penalty rates. However, income a minor receives from a testamentary trust can be “excepted trust income” and taxed at ordinary adult rates, with the usual tax-free threshold.<\/p>\n

The rule has limits. Since 1 July 2019, only income from assets that came from the deceased estate (or what those assets have been converted into) qualifies. Income from unrelated assets added to the trust later does not qualify, and where a trust holds both kinds, only the estate-related share is excepted.<\/p>\n

Distributions from a lifetime family trust to minors do not get this concession and are taxed at the penalty rates. A simple Will that gives minors their share outright, or holds it on a basic trust until they turn 18 or 25, offers no comparable flexibility.<\/p>\n\n

Asset protection<\/h2>\n

Property held by a trustee is generally not owned by the beneficiaries, which can offer protection:<\/p>\n