Disclaimer — This article is for general information and education purposes only and is not legal or financial advice. Solicitor…
Disclaimer — The information below is for general educational purposes only and does not constitute legal, financial or tax advice. Laws change and every family’s circumstances differ. Always obtain personalised guidance from a qualified solicitor and licensed financial adviser before taking—or refraining from—any action.
Why Estate Planning Matters When Your Kids Are Still Little
Raising children already involves a steady-state swirl of nappies, school runs and Lego underfoot—formal estate planning rarely tops the to-do list. Yet unexpected illness, accident or incapacity can strike at any age. A well-structured plan answers crucial questions before a crisis hits:
- Who would raise our children if we both died?
- How would that guardian fund school fees, sports and health care?
- Could creditors or an ex-partner reach the money we leave?
- Would life-insurance proceeds jeopardise Centrelink entitlements for a child with disability?
Putting robust documents in place now shields your kids from avoidable legal costs, family conflict and financial disruption later.
Choose (and Document) Guardians Wisely
Guardianship appointment belongs in a will. Without a documented choice, loved ones may disagree and a court decides. When selecting guardians consider:
- Values alignment – parenting style, education philosophy, religious views
- Practicalities – age, health, location, existing relationship with children
- Financial capacity – can the guardian’s household absorb extra dependants?
Tip: Write a non-binding “letter of wishes” detailing routines, medical notes and cultural preferences; guardians value this personal guidance.
The Cornerstone Documents for Young Families
| Document | Key Purpose | Why It Matters for Young Families |
|---|---|---|
| Will | Distributes assets; appoints executor and guardian | Without a will, Queensland intestacy rules control the estate, often forcing trusts to age 18 and ignoring partner assets split. |
| Enduring Power of Attorney | Nominates who manages finances or health decisions if you lose capacity | Ensures bills, mortgages and school fees are paid while you recover. |
| Binding Death-Benefit Nomination (Super) | Directs superannuation to a spouse, children, or estate | Super often eclipses home equity for young parents; a lapse defaults control to the fund trustee. |
| Testamentary Discretionary Trust (TDT) | Holds inheritances for minors; flexible income streaming | Protects assets until children reach maturity, allows tax-effective distributions, and shields funds from a child’s future divorce or bankruptcy. |
| Life-Insurance Policy | Provides liquidity to fund education, mortgage or guardian expenses | Paid quickly—often within weeks—outside probate delays; sum insured should reflect replacement of future income. |
Will vs Testamentary Trust for Minors – Head-to-Head Snapshot
| Simple Will with Gifts to Child at 18 | Will Establishing a TDT (Guardian Control) | |
|---|---|---|
| Asset protection | Low – inheritance becomes child’s personal asset at 18 | High – trustee keeps funds in protective trust; creditors & ex partners face barriers |
| Tax efficiency | Child taxed at minor penalty rates on investment income | Minor beneficiaries taxed as adults: first $18 200 tax-free, then marginal rates |
| Guardian flexibility | None – lump sum locked to child at 18 | High – trustee can pay school fees, medical costs, gap year travel |
| Administration cost | Minimal upfront; no ongoing compliance | Higher: annual trust tax return & record-keeping |
Funding the Plan – Life Insurance and Superannuation
Young parents usually hold more earning power than present capital. Consider:
Life insurance
- Calculate the “family security number”: mortgage payout + 5–10 years living costs + education budget – existing savings.
- Review annually; premiums often drop if health improves or debt falls.
- Decide whether to pay benefits into the testamentary trust or directly to the surviving spouse.
Superannuation
- For most retail and industry funds, super sits outside the estate.
- Lodge or update a binding, non-lapsing nomination:
- To spouse → immediate, tax-free if spouse under 60 and money is in taxed element.
- To estate → flows into testamentary trust (asset protection, income splitting).
- Check insurance held inside super aligns with your external cover.
Protecting a Child with Additional Needs
If a child receives the Disability Support Pension (DSP) or may need supported accommodation later, Special Disability Trusts (SDT) offer Centrelink concessions:
- Up to $781 250 (indexed) plus the family home can be held outside the child’s asset test.
- Funds must be used for “reasonable care and accommodation”; limited discretionary spending.
- SDTs can coexist with a broader testamentary trust for siblings.
Incorporating Digital Assets and Passwords
Children’s photos, family YouTube channels and frequent-flyer points have both sentimental and tangible value. Maintain:
- An encrypted password manager with one emergency access executor (“digital trustee”).
- An asset register: cloud storage, cryptocurrency wallets, PayPal credits, gaming accounts.
- Instructions on whether to memorialise or delete social-media profiles.
Step-by-Step Estate-Planning Roadmap for Young Parents
| Stage | Action Items |
|---|---|
| Clarify guardians & trustees | Discuss candidates with partner; obtain consent; record in will. |
| Audit assets & debts | List super balances, home equity, personal insurances, HECS debt. |
| Engage professionals | See solicitor for will/TDT draft; meet financial adviser for insurance needs analysis. |
| Execute documents | Sign wills, EPAs, death-benefit nominations with witnesses. |
| Store & share | Place originals in solicitor’s safe custody; give certified copies to executors/guardians. |
| Review every 2–3 years or on major life change (new baby, property purchase, separation). |
Real-World Scenario – How a Testamentary Trust Works
Background
Emma (34) and Jay (36) have two children under six and a $500 000 mortgage. Assets include a $650 000 home (equity $150 000), super ($300 000 each) and minimal savings. Both earn $90 000 salaries.
Estate plan
- Joint wills creating a Family Testamentary Trust if both parents die.
- Guardian: Emma’s sister; independent co-trustee: a trusted accountant.
- Life insurance: $1 million each (outside super) directed to the trust.
- Super nominations: Binding, to legal personal representative (flows into trust).
Outcome on worst-case event
- $2 million (life cover + super) lands promptly in the trust.
- Trustee uses interest and capital to clear the mortgage, fund schooling and summer camps.
- Each child receives controlled distributions until age 30, then may become co-trustee to learn responsibility rather than a lump-sum windfall at 18.
- Trust income split between two minors benefits from adult tax-free threshold, delivering thousands in annual tax savings that boost long-term growth.
Emotional and Financial Peace of Mind
Grief is hard enough. Knowing children will live with the carers you chose, in a home with paid mortgage and pre-funded education, relieves enormous emotional load on surviving relatives.
Frequently Asked Questions
Does naming godparents replace a legal guardian appointment?
No. Godparent status is non-binding in Australian law; guardianship must be in a will.
Can my parents and in-laws share guardianship?
Courts prefer one primary guardian to avoid conflict. You can name backups if the first choice declines.
At what age should my children take control of their inheritance?
Common milestones are 25 or 30, but flexible testamentary-trust deeds let trustees advance capital earlier for first-home deposits or business ventures.
What happens if we divorce after making mirror wills?
Marriage breakdown revokes super nominations to the ex-spouse and usually triggers will review; update documents post-separation.
Key Take-Aways
- Guardianship and trusteeship are the heart of a young-family estate plan. Document choices clearly in a will.
- Use flexible testamentary trusts to protect inheritances from creditors, relationship breakdowns and early spending.
- Life insurance and superannuation provide the liquidity to fund your children’s future—keep nominations updated.
- Review every few years and after major life changes; an outdated plan can be worse than none.
Sources / Citations
- Succession Act 1981 (Qld) pt 2 div 3 — wills and guardianship appointments.
- Australian Taxation Office, “Taxation Ruling TR 2010/3 – Children and Testamentary Trusts”.
- Department of Social Services, “Special Disability Trusts – Overview” (2025).
- ASIC Moneysmart, “Life Insurance Needs Calculator” (accessed 30 July 2025).
- Queensland Law Society, “Testamentary Trusts: Practical Guide for Practitioners” (2024).