A testamentary trust in New Zealand: what it is, what it costs and when it is worth it
A testamentary trust is a trust written into a will that only comes into existence once the will-maker dies, unlike a family trust which operates while you are alive. Named New Zealand law firms typically charge $1,500 to $3,000 more to draft a will that includes one, on top of a standard will's cost (PK Law pricing, retrieved 9 September 2026).
What is a testamentary trust?
A testamentary trust is created by the terms of a will itself, rather than by a separate trust deed signed during your lifetime, and it only takes effect when the will-maker dies and the will is given effect (Wills Act 2007, s8(4), retrieved 9 September 2026, which allows a will to create a trust of the same kind a person could create during their life). Until then, it has no legal existence and can be changed at any time, since it is simply part of the will, which itself can be changed or revoked at any point before death.
What is the difference between a trust and a testamentary trust?
An ordinary (inter vivos or "living") trust is set up and operates while you are alive, with assets transferred into it and a trustee managing them under the Trusts Act 2019 from that point onward. A testamentary trust exists only inside a will and comes into being only on death, so until then there is no trust, no trustee acting, and no assets held; it is a plan for a future trust, not a present one (Wills Act 2007, s8(4), and general trust law, retrieved 9 September 2026).
Why would you set up a testamentary trust?
The most common reasons are protecting an inheritance for children until they are old enough to manage it responsibly, protecting a vulnerable beneficiary such as someone with a disability or addiction, keeping assets separate in a blended family situation, or reducing the risk that an inheritance is exposed to a beneficiary's relationship property claims or creditors (Public Trust, Comprehensive Will tier notes, and PK Law pricing notes, retrieved 9 September 2026). See our Property (Relationships) Act in NZ guide for how an inheritance can otherwise become relationship property.
What a testamentary trust costs
Because a testamentary trust is drafted as part of a will rather than as a separate document, its cost shows up as an increase in the will's own drafting fee rather than a completely separate charge.
| Provider | Cost impact of a testamentary trust |
|---|---|
| PK Law (named Auckland firm) | Moves a will from Complexity Level 2 ($1,500 single / $2,750 couple) into Level 3 ($2,500 single / from $4,450 couple) |
| lawyerfinder.co.nz (industry estimate) | A will including a testamentary trust specifically: $1,500 to $3,000 |
| Public Trust | Requires the Comprehensive Online Will tier ($159 individual / $271 couple) or the In-Centre service ($750 / $1,400), rather than the Basic or Standard tiers |
Source: PK Law, Pricing; lawyerfinder.co.nz, Wills & Estate Lawyer Cost NZ 2026; Public Trust, Will pricing; all retrieved 9 September 2026. See our making a will in NZ guide for the full pricing tables these figures are drawn from.
What is the biggest mistake parents make when setting up a trust fund?
Named New Zealand estate planning guidance points to two recurring mistakes: not clearly specifying at what age or under what conditions a child can access trust funds (leaving too much discretion, or too little, to the trustee), and choosing a trustee without considering whether they have the time, skill or willingness to manage the trust properly for years or decades (Public Trust and law firm guidance on trust drafting, retrieved 9 September 2026). Get this decided explicitly in the will, rather than leaving it to be worked out later.
Advantages and disadvantages
What are the disadvantages of a testamentary trust?
A testamentary trust adds legal complexity and cost to a will, requires an ongoing trustee to actually administer it once it takes effect (which can itself involve annual accounting and compliance under the Trusts Act 2019), and can make an estate slower and more expensive to fully wind up compared with a simple outright gift to beneficiaries (PK Law pricing notes and general trust administration guidance, retrieved 9 September 2026). It is not automatically the right tool; for a simple estate with adult beneficiaries who can manage money responsibly, a straightforward will may be more cost-effective.
Can you withdraw money from a testamentary trust?
Only in the way the will's own trust terms allow: the trustee controls distributions according to what the will specifies, whether that is a fixed age at which a beneficiary receives capital outright, discretionary payments for specific purposes such as education, or ongoing income distributions, so there is no single answer without reading the specific trust's terms (general New Zealand trust law, retrieved 9 September 2026). A beneficiary cannot simply access trust funds on demand unless the will's terms specifically allow it.
When a testamentary trust is worth the extra cost
| Your situation | A testamentary trust is commonly worth considering |
|---|---|
| Children under 18, or young adults you don't want inheriting a lump sum immediately | Yes |
| A beneficiary with a disability, addiction, or who cannot manage money reliably | Yes |
| Blended family, wanting to protect an inheritance for your own children specifically | Yes |
| A single adult beneficiary who can manage an inheritance responsibly | Usually not needed |
| Wanting to reduce the risk an inheritance becomes relationship property for a beneficiary | Worth discussing with a lawyer |
Source: Public Trust and PK Law guidance on will complexity tiers, retrieved 9 September 2026. See our Property (Relationships) Act in NZ guide for the relationship-property angle specifically.
How does a testamentary trust protect against relationship property claims?
By keeping an inheritance held in trust rather than paid out directly to a beneficiary, it can be kept as trust property rather than becoming relationship property the beneficiary's own spouse or partner could claim a share of under the Property (Relationships) Act 1976, though the details depend on how the trust is drafted and how the beneficiary treats the funds afterwards, so this needs specific legal advice rather than a general assumption (general New Zealand trust and relationship property law, retrieved 9 September 2026). See our Property (Relationships) Act in NZ guide for how directly-inherited property is otherwise treated.
Setting one up, and how it works day to day
Do I need a lawyer to set up a testamentary trust?
In practice, yes. A testamentary trust has to be drafted as a specific, legally effective part of your will rather than a general statement of intent, and Public Trust's own Comprehensive Online Will tier, the level that covers a testamentary trust, is deliberately positioned above its simpler self-serve tiers for this reason (Public Trust, Will pricing, retrieved 9 September 2026). A generic template or DIY will is a poor fit for a testamentary trust; see our will template in NZ guide for where DIY options stop being safe.
Is a testamentary trust the same as a family trust?
No, and the two are priced and structured differently:
| Family trust | Testamentary trust | |
|---|---|---|
| When it starts | While you are alive | Only on your death |
| How it's created | A separate trust deed, with assets transferred in | Written into your will |
| Ongoing cost while you're alive | Annual compliance and administration | None, since it does not yet exist |
| Named provider pricing | From $2,500 as a standalone setup (estateplanning.co.nz) | Priced as an addition to a will (see the cost table above) |
Source: estateplanning.co.nz, Pricing; PK Law, Pricing; Public Trust, Will pricing; all retrieved 9 September 2026.
Who should be the trustee of a testamentary trust?
Someone you trust to manage money responsibly for the length of time the trust needs to run, which could be a family member, a friend, a professional trustee such as Public Trust, or a combination acting together; the right choice depends on the trustee's skill, availability and willingness to take on what can be a multi-year responsibility (Public Trust and law firm guidance on trust drafting, retrieved 9 September 2026). Naming an alternate trustee in case your first choice cannot act is standard practice.
How long does a testamentary trust last?
For however long the will specifies, commonly until the youngest beneficiary reaches a chosen age, though the exact duration and any conditions for winding it up are set entirely by the trust's own terms in the will rather than by a fixed legal rule (general New Zealand trust law and will-drafting practice, retrieved 9 September 2026). This is one of the specific terms a lawyer will help you set deliberately rather than leave to a generic default.
What happens to a testamentary trust if I change my mind?
Nothing changes automatically; because a testamentary trust only exists once you have died, you can change or remove it at any time before then simply by changing your will, in exactly the same way you would change any other part of it, following the Wills Act 2007's signing and witnessing rules for the change (Wills Act 2007, s9 and s11, retrieved 9 September 2026). See our making a will in NZ guide for how updates generally work.
Does a testamentary trust reduce tax?
Not published as a general rule on this page; New Zealand trust taxation depends on the specific trust's terms, its trustee's tax residency and the type of income involved, and is genuinely specific to each situation rather than a simple yes or no. Get advice from a lawyer or accountant on the tax treatment of your specific proposed trust rather than assuming a tax benefit exists.
Where a testamentary trust fits in your wider plan
QuoteHub's read is that a testamentary trust is worth the added cost precisely when it solves a problem a simple will cannot, protecting a young or vulnerable beneficiary, or a blended family's separate lines of inheritance, and not worth it as a default add-on for every will. Talk to a lawyer or Public Trust about your specific family situation before deciding either way, since the wrong structure can cost more in ongoing administration than it saves.
This page is part of our estate planning cluster. See making a will in NZ for the full cost comparison across providers, will templates in NZ for when a DIY option is not enough, dying without a will in NZ for what happens without any of this planning, the Property (Relationships) Act in NZ for how relationship property interacts with an inheritance, and who gets your life insurance payout in NZ for how a policy can sit alongside or outside a trust. For what happens once someone has died, see our when someone dies cluster, including probate in NZ and the executor of a will in NZ. Our estate planning and insurance guide, our life insurance beneficiaries guide, our life insurance and inheritance guide, our insurance for blended families guide and our insurance for special needs dependants guide go further into the family situations a trust is often used for. Our enduring power of attorney and insurance guide covers a related, separate form of planning for while you are alive. See our life insurance product hub for cover options, our how does life insurance work in NZ guide for the basics, try our own free will service, and see how it works and our methodology for how QuoteHub builds its guides.
Financial advice is provided by Craig Smith Business Services Limited, trading as Smiths Insurance & KiwiSaver, a licensed Financial Advice Provider (FSP712931). QuoteHub is a trading name.
Adviser's view
The mix-up QuoteHub sees most often is a testamentary trust confused with a family trust: one exists only from death and costs nothing while you are alive, the other is set up and administered while you are alive with its own ongoing compliance. The second most common gap is a trust that never specifies the age or conditions at which a child can access funds, leaving a trustee to guess at a decision the will should have made explicit.
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Cite this page QuoteHub NZ (2026). Testamentary Trust NZ: What It Is, Cost and When to Use One. www.quotehub.co.nz/guides/estate/testamentary-trust-nz. Updated 2026-09-09.
References
- New Zealand Legislation: Wills Act 2007
- PK Law: Pricing
- lawyerfinder.co.nz: Wills & Estate Lawyer Cost NZ 2026
- Public Trust: Will pricing
- estateplanning.co.nz: Pricing
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