Protect More with a Testamentary Trust Will
Wills and Estates
If you own a home in Beecroft, Cheltenham, Epping, or anywhere across Sydney’s Hills District or North Shore, there’s a good chance your estate is worth more than you think — and a standard will may not be protecting it as well as you assume.
At Fioro Legal, we work with families every week to help them plan for the future. One of the most common conversations we have is about testamentary trust wills — what they are, who actually needs one, and why they offer protections that a standard will simply doesn’t.
Here’s what we want every property-owning family in Sydney to understand.
Your estate is probably bigger than you realise
A lot of people assume testamentary trusts are only for the wealthy — something reserved for large estates and complicated family situations. In reality, simply owning a home in the Hills District and Northern District of Sydney puts most families into “large estate” territory without them even realising it.
Median house prices in suburbs like Beecroft, Cheltenham, Epping, and Castle Hill now sit well above $2.5 million, and Sydney-wide median prices are tracking toward the $2 million mark. Median house prices in Sydney’s North Shore generally range from $2.5 million to over $5 million. Once you add superannuation, share portfolios, term deposits, or an investment property into the mix, many families are looking at an estate worth three, six, or more million dollars.
That’s not a small estate. That’s exactly the kind of estate that benefits most from additional protection.
What can actually go wrong
We’ve seen plenty of situations where a standard will led to outcomes families never intended:
A child divorces after inheriting. This is the scenario we’re asked about more than any other. If your child holds an inheritance in their own name and their marriage ends, a significant portion — often as much as half — can be lost to their former spouse as part of the property settlement. On an estate of two or three million dollars split between two children, that can mean hundreds of thousands of dollars walking out the door.
A child passes away unexpectedly, and the inheritance moves sideways. If your child inherits through a standard will and later passes away before you’d expect, their own will usually leaves everything to their spouse. Your son- or daughter in-law inherits what you intended for your own family line. If they later re-partner or remarry, that inheritance can continue moving further away from your bloodline — sometimes ending up with someone you’ve never even met.
Creditors or legal claims put assets at risk. Professionals in higher litigation fields, business owners, or simply beneficiaries who run into financial trouble can have a directly-held inheritance exposed to creditors in a way that’s very difficult to prevent after the fact.
How a testamentary trust will actually works
Here’s the good news: setting one up is far simpler than most people expect.
A testamentary trust will is still just a will — one single document. There’s no separate company to establish, no ongoing trust deed to maintain, and no complex structure sitting alongside it. The will itself creates the trust, and that trust only comes into existence once you’ve passed away.
Instead of assets passing directly into your children’s personal names, they’re held inside a trust structure. Your children (or whoever you nominate) act as trustees, meaning they retain full control over the assets — what to do with them, when to sell, when to invest — without personally owning them in a way that exposes them to outside claims.
For most families, this distinction barely changes day-to-day life. Your children can still use the assets to buy a home, invest, or support their lifestyle. What changes is the protection layered around those assets.
The three biggest advantages
“My children are too young, I’ll sort this out later.” Testamentary trusts work just as well for minor children as they do for adults. They don’t need to be unwound when a child turns 18 or 25 — they simply continue. The risk in waiting is that wills can only be changed while you’re alive. If something unexpected happens before you’ve made the change, the opportunity is gone.
“This will be too complicated or restrictive for my children.” In practice, testamentary trusts offer more flexibility, not less. They can hold any kind of asset — property, shares, cash — and the way they’re used can evolve as your family’s circumstances change over time. Some families even choose to build in an opt- in clause, so beneficiaries can decide for themselves whether to use the trust structure when they inherit.
“This is just for the family home.” Quite the opposite — we generally recommend leaving the family home to pass normally between spouses, only restructuring assets into trust once the surviving spouse has also passed away. The trust structure tends to suit other assets such as investment properties, share portfolios, or cash more naturally.
Common misconceptions addressed
Protection from relationship breakdown. Roughly 30 to 40% of marriages end in divorce, so this isn’t a remote possibility — it’s a realistic scenario for many families.
Assets held in a testamentary trust are structured as discretionary, meaning no beneficiary has an automatic entitlement to a fixed share. Because no one — including a separating spouse — can point to a specific percentage of the trust as belonging to one person, those assets are extremely difficult to draw into a property settlement.
Protection from bankruptcy and creditors. The same discretionary structure that protects against divorce also protects against creditors. If a beneficiary faces business difficulties, legal claims, or financial hardship, trust assets generally sit outside the reach of those claims.
Significant tax advantages through income streaming. This is a benefit many families don’t realise exists. If a trust held asset generates income — rent from a property, dividends from shares — that income can be distributed across multiple beneficiaries, including grandchildren under 18, who can each access their own tax- free threshold. In one real example we walk clients through, this kind of structuring saved a single beneficiary close to $150,000 in tax over a 10 year period, simply by sharing rental income and eventual capital gains across family members in a tax- effective way, rather than it all landing on one person’s tax return. However, please note that these tax streaming benefits are under review as a result of the 2026 budget proposals but nonetheless, the asset protection benefits mentioned above remain, in our view, the primary reason for establishing a testamentary trust.
Building a long-term family legacy
Perhaps the most valuable way to think about a testamentary trust is as a long-term wealth vehicle, not just a protective measure. These trusts can run for up to 80 years, meaning the benefit extends well beyond your children to your grandchildren and even great grandchildren.
A common and effective approach is for adult children to use trust funds to purchase a substantial, income-producing asset outright — a unit, a house, or a solid share portfolio — rather than simply holding cash. That asset continues to grow in value inside the protected trust environment, while any income it generates can still be distributed for day-to-day needs, school fees, or to support a mortgage. Even if a divorce occurs later, the underlying asset inside the trust remains protected, giving your child something secure to fall back on no matter what happens in their personal life.
In a property market where median prices continue to climb, having a protected, growing asset base set up for the next generation can make a meaningful difference for grandchildren trying to enter the Sydney property market in years to come.
Is a testamentary trust will right for your family?
It’s worth considering if you:
- Own property or hold significant assets
- Have children or grandchildren you want to provide for
- Want to protect your family’s wealth for future generations
- Run your own business
- Have a basic will that hasn’t been reviewed in the last five years
If any of those apply to you, it’s worth having a conversation about whether your current estate plan is doing everything it could be.
Frequently Asked Questions
This article is general in nature and does not constitute legal or financial advice. Every family’s circumstances are different, and estate planning should always be tailored to your individual situation.
If you’d like to discuss whether a testamentary trust will suits your family, Fioro Legal offers a free 15-minute video consultation — book online or get in touch at info@fiorolegal.com.au. We also have a detailed webinar recording on the topic available here.
Mobile: 0481 848 450
Email: info@fiorolegal.com.au
Web: www.fiorolegal.com.au
