When it comes to divvying up your estate after death, testamentary trusts are often touted as an option. They can be a way to ‘rule from the grave’, giving you more control over the way your assets are distributed – placing them in a trust, rather than having them given directly to your beneficiaries.

However, it’s important to consider that all the power lies with the trustee, not the person you want to provide for. And though the trustee has a fiduciary duty to the beneficiaries, that may require a significant level of foresight and wisdom. Let’s look at some of the ways testamentary trusts can go south.

Locking your money away in a testamentary trust can cause problems for your beneficiaries.Credit: Simon Letch

There are many ways to structure a testamentary trust. The trustee could be a friend, relative or professional organisation. The income beneficiary may be your spouse, who may end up without actual ownership of the trust assets, just the earnings.

Remaindermen are the beneficiaries who will receive the assets on the death of the income beneficiary, maybe your children from an earlier marriage. Whatever is not paid to the........

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