Safeguarding Your Children's Inheritance via a Testamentary Trust
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By Stacy Rouchos
Estate planning is about making sure your family is cared for when you’re no longer around. One of the most effective ways to do this—especially if you have children—is by setting up a testamentary trust in your will. This simple step helps ensure your wishes are honoured and prevents your children’s inheritance from being wasted or tied up in unnecessary costs and red tape.
Unlike a living trust, which you set up while you’re still alive, a testamentary trust only comes into effect after you pass away. It’s created through your will and spells out who will manage the trust, who the beneficiaries are, and what the rules are for handling your funds. You’ll need at least two trustees: ideally one with professional know-how and another who understands your children’s personal needs.
If you leave money directly to a minor child in your will, it doesn’t go straight to them. By law, it has to be paid into the Guardian’s Fund, managed by the Master’s Office, until your child turns 18. While this sounds protective, in practice it often creates complications. The money may not grow optimally and could lose value against inflation, access is limited and using the funds for things like school fees or daily expenses can be slow and frustrating. There are also ongoing administrative hoops to jump through.
By contrast, a testamentary trust allows your appointed trustees to make sensible decisions about when and how the money is used. They can cover your children’s
schooling, medical needs, and other living expenses without everything being locked away until adulthood.
A trust also acts as a safeguard once your children reach legal age. If they were to inherit a large lump sum at 18 or 21, there’s a real risk they could spend it recklessly or be influenced by others. Many testamentary trusts continue until the child is around 23 to 25, giving them time to mature before inheriting fully and ensuring they are better prepared to manage their finances responsibly.
Testamentary trusts can be tailored to suit your family’s unique circumstances and will automatically apply to assets you acquire in the future—not just what you own today. They’re often funded through life insurance payouts, and the cost of setting them up is covered by your estate after your death. The key is having a well-drafted will that clearly sets out the trust’s rules, since the will effectively serves as the instruction manual for how the trust should operate.
Including a testamentary trust in your will is one of the most practical ways to protect your children’s future. It keeps their inheritance safe, ensures funds are available for their education and living needs, and avoids the bureaucracy of the Guardian’s Fund. Most importantly, it prevents your children from squandering what you’ve worked so hard to leave them.
A testamentary trust is more than just a financial tool—it’s a safeguard that offers your children security, guidance, and a fair chance at building a strong future.