Two Changes To Testamentary Trusts You Should Be Aware Of

If your Will includes a testamentary trust, two recent developments are worth understanding, one already in effect, one proposed but not yet law.

Queensland’s Trust Laws Have Changed

The Trusts Act 2025 (Qld) commenced on 28 April 2026, replacing legislation that had governed Queensland trusts for more than 50 years. It applies immediately to all existing Queensland trusts, including testamentary trusts and importantly, it also applies to trusts not yet in operation because the Will-maker is still living.

The new Act introduces specific trustee duties, including express duties of care, honesty and record-keeping. It updates the default rules for trustee appointment and removal and substantially increases the amount of capital that may be advanced to beneficiaries. Significantly, many of these new rules apply regardless of what your Will says.

If your Will was drafted before 28 April 2026, it may not operate exactly as you intended under the new legislation. A review with your estate planning solicitor is a sensible step.

A Minimum Tax on Discretionary Trusts Has Been Proposed

The 2026–27 Federal Budget included a proposal to introduce a 30% minimum tax on the taxable income of discretionary trusts, with a proposed start date of 1 July 2028. This is not yet law, and the final design of the measure may change before it is legislated, if it proceeds at all.

Under the current rules, trust income flows to beneficiaries and is taxed at their individual rates. The proposed change requires the trustee to directly pay 30% tax first, with a non-refundable credit passed to beneficiaries. For beneficiaries on lower marginal rates (such as children, students, retirees) the credit is worth less than the tax already paid. This means that the income-splitting benefit that has traditionally made discretionary testamentary trusts attractive will be substantially reduced.

A Critical Note:

A testamentary trust in your Will does not exist while you are still living. Unless a trust was already in operation before 12 May 2026, it will not qualify for the limited ‘grandfathering’ the Government is proposing. It is important to consider that fixed testamentary trusts and special disability trusts are excluded from the new measures entirely.

Does This Mean You Should Change Your Will?  

Not necessarily, but a review is highly advisable. The non-tax reasons to use a testamentary trust remain strong. Protecting an inheritance from a beneficiary’s relationship breakdown, bankruptcy or financial vulnerability is not affected by either of these changes. For many clients, that protection alone justifies preserving the testamentary trust structure in their Wills.

What has changed is the tax calculation. Some clients will benefit from switching to a fixed testamentary trust. Others may find the current structure still works well for their family’s circumstances. The right answer depends on your individual situation. Also, the actual design of the proposed tax changes is not yet finalised and it may change significantly before becoming law in 2028.

What To Do Now

There is no immediate deadline, but we recommend reviewing your Will within the next 6 to 12 months, or at least well before the proposed tax changes take effect in July 2028.

Contact us to make an appointment with one of our estate planning solicitors.

Disclaimer:

The information contained in this article is for general informational purposes only and is not intended to provide legal advice or substitute for the advice of a professional. This information does not consider your personal circumstances and may not reflect the most current legal developments. Should you need advice, please contact our firm for targeted information relating to personal your situation. 

Greenhalgh Pickard’s Wills and Estates Team