A Young Family's Estate Plan: Amanda and Rob's Story
For many young families, estate planning can feel like something to worry about later.
Amanda and Rob were in their 30s, with two young children, Noah, 5, and Sophie, 1. They wanted to make sure their children would be looked after if something happened to either of them.
Their concerns went beyond simply deciding who would inherit their assets.
They wanted to think about what would happen if one of them died and the surviving parent later re-partnered. They wanted to avoid their children receiving a significant inheritance before they were ready to manage it. They also wanted to make sure there was a plan for their children's care if both parents died.
Their estate plan was built around those priorities.
This is an example of how a testamentary discretionary trust can form part of a broader estate plan for a young family.
What did Amanda and Rob want their estate plan to achieve?
Amanda and Rob had three main priorities.
1. Protect their children's inheritance
Amanda and Rob wanted to provide for their children while also considering what might happen if one parent died and the surviving parent later entered a new relationship.
They wanted their estate plan to provide a structure that could continue to benefit the surviving parent while also preserving assets for Noah and Sophie.
2. Manage the children's inheritance while they were young
Noah and Sophie were only five and one.
Amanda and Rob didn't feel comfortable with the idea of their children receiving a significant inheritance outright while they were young adults.
They wanted a structure that could allow assets to be managed for their children's benefit while they were growing up, with flexibility around when and how benefits were provided.
3. Provide for the children's needs
Amanda and Rob also wanted their estate plan to provide resources that could be used for their children's needs.
That might include education, living expenses, medical expenses, activities, and other costs associated with raising children.
Their estate plan needed to work alongside the practical realities of raising a family.
Standard Will or Testamentary Discretionary Trust?
One of the decisions Amanda and Rob needed to consider was how their assets should pass under their Wills.
A standard Will can provide for assets to pass directly to a beneficiary. Once the beneficiary becomes the owner of the assets, they generally control what happens to those assets.
A testamentary discretionary trust takes a different approach.
Assets can pass into a trust established under the Will, with a trustee responsible for managing the trust and making distributions to eligible beneficiaries in accordance with the trust terms.
The beneficiaries don't personally own the trust assets simply because they are beneficiaries of the trust.
This can provide additional flexibility around how an inheritance is managed and distributed.
For Amanda and Rob, that flexibility was important.
A TDT wasn't selected because it is automatically better than a standard Will. It was selected because the structure aligned with the outcomes they were trying to achieve.
Protecting an inheritance over time
One of Amanda and Rob's concerns was what might happen to their children's inheritance if one parent died and the surviving parent later re-partnered.
If assets pass directly to the surviving spouse, those assets become part of that person's own financial affairs. The surviving spouse may later decide how those assets are dealt with, including through their own estate plan.
A TDT can provide a different structure.
Rather than the inheritance becoming personally owned by the surviving parent, assets can remain within the trust and be managed for the benefit of the people identified in the trust.
This can provide an additional layer of protection and flexibility.
It doesn't mean a TDT can guarantee exactly what will happen to the assets decades into the future. The trust needs to be carefully drafted, and the trustee must administer it in accordance with the trust terms and the law.
For Amanda and Rob, the important thing was having a structure that better reflected their intention to provide for both the surviving parent and their children.
Managing an inheritance for young children
Amanda and Rob also wanted to avoid the idea of their children receiving a large inheritance outright while they were still young.
A Will can specify that a child's gift is held on trust until a later age or subject to other conditions. A testamentary discretionary trust can provide a different level of flexibility because the trustee can make decisions about distributions within the terms of the trust.
That can allow the trustee to consider the child's circumstances at the time.
For example, money could potentially be used for education, living expenses, medical needs, or other costs that benefit the child.
As the children grow older, their circumstances and ability to manage money will change.
A flexible trust structure can allow those changing circumstances to be taken into account rather than assuming that a particular age will automatically be the right time for a child to receive everything outright.
What about tax?
Tax was one of the matters considered as part of Amanda and Rob's estate plan, but it wasn't the only reason for choosing a TDT.
Testamentary trusts can have specific tax treatment, including rules that can allow certain income derived from assets of a deceased estate to be treated as excepted trust income for a minor beneficiary. The rules are technical and depend on the source and nature of the income.
For Amanda and Rob, the TDT was about the broader estate planning strategy, including flexibility, protection, and how their children's inheritance could be managed.
Tax was one part of that conversation.
Planning for who will care for the children
For parents of young children, estate planning isn't only about money.
Amanda and Rob also needed to consider who they would want to care for Noah and Sophie if both parents died.
Queensland law allows a parent or guardian to appoint a testamentary guardian for a child by Will. A testamentary guardian can have responsibilities relating to the child's long-term care, welfare, and development, including matters such as education and religious upbringing.
Importantly, appointing a testamentary guardian does not automatically mean that person will become the child's day-to-day carer in every circumstance.
If another parent survives, the legal position is different. A testamentary guardian can also have different responsibilities depending on existing guardianship arrangements or court orders.
That's why simply writing someone's name in your Will isn't the whole conversation.
Amanda and Rob thought carefully about who they trusted to make decisions for their children and what they wanted their children's future to look like.
Leaving guidance for the children's upbringing
Amanda and Rob also prepared a Letter of Wishes.
This gave them an opportunity to record the things that mattered to them as parents.
They could provide guidance about matters such as:
education;
family traditions;
extracurricular activities;
religious or cultural practices;
important relationships;
their hopes for their children's upbringing; and
the values they wanted their children to grow up with.
A Letter of Wishes doesn't replace the legal provisions in a Will and isn't a substitute for appointing appropriate guardians.
Its value is in capturing the parents' voice and providing practical guidance to the people who may one day be caring for their children.
Was a TDT the right choice for Amanda and Rob?
For this family, a testamentary discretionary trust formed part of a broader plan designed around their circumstances and priorities.
It gave them a structure that could provide flexibility around their children's inheritance, allow assets to be managed for their benefit, and continue to provide for the family in different circumstances.
It also sat alongside the other parts of their estate plan, including their Will, guardianship arrangements, and Letter of Wishes.
That doesn't mean every young family needs a TDT.
Estate planning works best when the structure follows the family's circumstances, rather than starting with a particular legal product and trying to make the family fit around it.
What can other young families learn from Amanda and Rob?
Amanda and Rob's estate plan highlights some of the questions parents should consider:
Who would care for your children if both parents died?
Who would manage their inheritance?
At what age, and in what circumstances, would you want your children to receive their inheritance outright?
What would happen to your assets if one parent died and the surviving parent later re-partnered?
Could a trust structure provide benefits or protections for your family?
How should your superannuation and life insurance fit into your overall estate plan?
What do you want your children's guardians to know about raising them?
Are your Will and other estate planning arrangements working together?
You don't need to have all the answers before you start.
That's part of the estate planning process.
The goal is to understand what matters to your family, identify the risks and options, and create a plan that gives your family the best possible protection for the future.
