Recent Federal Budget commentary has led many people to ask the same question:
Are testamentary trusts still worth having in a will?
For many families, the answer is still yes.
That is because a testamentary trust has never only been about tax. Tax can be one benefit, but it is only one part of the picture. For many people, the bigger value is the extra protection, flexibility, and control a testamentary trust can offer compared with a basic will.
If you are already exploring testamentary trusts as part of your estate plan, this is a good time to review the structure carefully, but not a reason to assume the strategy no longer has value.
At a glance
The recent budget announcement does not automatically make testamentary trusts irrelevant.
A testamentary trust may still be worth considering if you want to:
- protect children’s inheritance
- reduce risk if a beneficiary later separates from a partner
- help protect inherited assets from claims or financial risk
- give trusted adults control while young beneficiaries are still maturing
- create a more thoughtful succession plan for children and grandchildren
- keep flexibility in place while the law continues to develop
What changed after the Federal Budget?
The recent Federal Budget included an announcement about a proposed 30% minimum tax on discretionary trusts from 1 July 2028. As the Australian Government explains in its official tax explainer on minimum tax on discretionary trusts, the measure includes some stated exceptions, and the ATO has also made clear that the announced measure is not yet law.
That naturally caused concern, because tax treatment has often been part of the discussion around testamentary trusts.
But there are two important points to keep in mind.
1. The announcement is not the same as final law
At this stage, this is still a government announcement rather than a final, fully settled legal position.
That means:
- the rules are not yet fully locked in
- consultation and legislative detail still matter
- the final treatment may not look exactly the same as the headline announcement
2. Tax is only one reason people use testamentary trusts
Even if tax settings do change, that does not remove the other reasons families choose this structure in the first place.
For many families, the real value of a testamentary trust has more to do with asset protection, family protection, and long-term planning than tax alone.
So, are testamentary trusts still worth it?
In many cases, yes.
Not because nothing has changed.
And not because tax no longer matters.
They are still worth considering because a testamentary trust can help with issues that a basic will often does not deal with nearly as well.
That includes:
- protecting inheritance for children
- preserving assets in blended family situations
- reducing exposure where a beneficiary runs a business or works in a high-risk profession
- managing inheritance for young or financially immature beneficiaries
- planning more carefully for grandchildren and later generations
- keeping flexible options open for your loved ones after your death
Why a testamentary trust can still be more powerful than a basic will
A basic will can work well in the right circumstances.
But a testamentary trust can add another layer of planning where your family situation is more complex, or where protection matters just as much as simplicity.
Here are some of the key reasons families still consider them:
A. If you have young children
This is one of the clearest situations where a testamentary trust can still be very valuable.
It can protect your children’s inheritance if life changes after your death
If one parent dies and the surviving parent later repartners, changes their own will, or goes through a relationship breakdown, many people worry about whether the inheritance they intended for their children will still end up where they hoped.
A testamentary trust can help preserve the inheritance under the original willmaker’s plan, instead of relying entirely on future decisions made by someone else.
It can stop children receiving full control too early
Many parents are uncomfortable with the idea of a child receiving full control of a large inheritance at 18.
A testamentary trust allows you to choose a later age for control and leave trusted decision-makers in place until your children are better able to manage that inheritance responsibly.
B. If you have adult children
A common mistake is assuming that testamentary trusts are only for parents of young children.
They can also be very useful where adult children are:
- in relationships
- running businesses
- working in professions with higher legal or financial risk
- not yet in a strong position to manage inherited wealth well
It can help protect inheritance from outside risk
If an adult child later goes through a relationship breakdown, financial distress, or legal trouble, an inheritance left outright may be more exposed than a carefully structured inheritance held through a testamentary trust.
That does not mean a testamentary trust guarantees protection in every case.
It does mean the planning is often stronger and more deliberate than a basic will.
C. If you are part of a blended family
Blended families often need more careful estate planning than a simple “everything to my spouse” approach.
A common concern is this:
What happens if my spouse moves on, repartners, has more children, or changes their will after I die?
A testamentary trust can help address that concern by preserving the inheritance you intended for your own children, rather than leaving everything dependent on future personal decisions and family circumstances you cannot control.
For many blended families, this remains one of the strongest reasons to consider a testamentary trust.
D. If protecting grandchildren matters to you
Some people are not only thinking about what happens to their children.
They are also thinking about what happens after their children die.
A testamentary trust can allow for more thoughtful multi-generational planning by helping you shape how inherited wealth is controlled and preserved over time.
That can be especially important if:
- you want part of your estate to stay within the family line
- you do not want grandchildren receiving inheritance too young
- you do not want the success of your estate plan to depend entirely on your child making the “right” will later on
Why the tax question should not be the only question
The budget discussion has put tax in the spotlight.
That makes sense. Tax matters.
But if the conversation starts and ends there, it misses the bigger estate planning picture.
A testamentary trust may still be worthwhile because it helps answer questions like:
- Who controls the inheritance after I die?
- How exposed will my children’s inheritance be if life becomes complicated?
- What happens if a beneficiary is vulnerable, immature, or financially at risk?
- How can I protect family wealth across more than one generation?
- How do I leave flexibility rather than forcing one rigid outcome?
Those are estate planning questions, not just tax questions.
What we know, and what we still do not know
This is where a lot of confusion comes from.
What we know
We know there has been a government announcement about changes to discretionary trust tax treatment from 1 July 2028.
We also know the broader estate planning benefits of testamentary trusts still exist and are still highly relevant for many families.
What we do not know
We do not yet know exactly how every part of the proposed framework will settle once legislation is finalised.
That is important, because estate planning should not be based on panic or headlines alone.
The right response is usually not to throw out a well-considered structure.
It is to review it properly and make sure it still aligns with your family, your assets, and your goals.
Why flexibility matters even more now
One of the strongest planning advantages of a well-drafted testamentary trust is flexibility.
That matters even more when the legal and tax landscape is changing.
A carefully drafted structure can leave room for your executor and loved ones to get legal, tax, and financial advice at the relevant time, then decide what is most appropriate in light of the circumstances then.
That is often far better than having no testamentary trust option at all.
If you want the option of a testamentary trust, it must be in your will before you die
This is one of the most important practical points.
If your will does not include a testamentary trust, your family cannot add one after you die.
Your estate can still be administered, of course. But the will cannot be changed after death to add the flexibility and protection that a testamentary trust could have provided.
That is why the current uncertainty is not a reason to put estate planning off. If anything, it is a reason to make sure your will is thoughtful, flexible, and properly prepared from the start.
When a testamentary trust may still be especially worth considering
A testamentary trust may still be particularly worth discussing if:
- you have young children
- you are part of a blended family
- one or more beneficiaries run a business
- one or more beneficiaries work in a higher-risk profession
- asset protection is important to you
- you want to protect grandchildren
- your family circumstances are likely to become more complex over time
- you want more control than a basic will usually offers
Frequently asked questions
Are testamentary trusts dead after the Federal Budget?
No. The recent budget announcement has created uncertainty, especially around tax, but it does not mean testamentary trusts have stopped being useful. For many families, their value goes well beyond tax.
Does the budget mean I should remove the testamentary trust from my will?
Not necessarily. In many cases, removing that option would reduce flexibility rather than improve it. The better approach is usually to review the structure properly and consider your broader estate planning goals.
Are testamentary trusts only useful for tax?
No. Tax can be one advantage, but many families use testamentary trusts because of the control, protection, and succession-planning benefits.
Are testamentary trusts only for families with young children?
No. They can also be useful where adult children, grandchildren, blended family dynamics, business risk, or asset protection concerns are part of the picture.
Can I decide to add a testamentary trust after death?
No. If you want the option of using a testamentary trust, it must be included in the will while the willmaker is still alive and has capacity.
Final thoughts
The recent Federal Budget has understandably made many people nervous about testamentary trusts.
But the better question is not whether they are “dead.”
The better question is whether they still help you protect the people and outcomes you care about most.
For many families, the answer is still yes.
A testamentary trust may still be one of the most useful estate planning tools available, not because the law never changes, but because good estate planning is about more than one tax rule.
If you would like to review whether a testamentary trust still makes sense for your family after the recent budget announcement, Bayside Wills & Estates Lawyers can help. You can learn more about testamentary trusts or arrange a free consultation to discuss your will and estate planning options.
Disclaimer: This article is intended as general information only. It does not replace legal, tax or financial advice tailored to your circumstances. Because estate planning and testamentary trusts depend on your personal situation and the law may change, you should obtain specific advice before making decisions about your will or estate plan.
