A Testamentary Trust is a device that allows for certain arrangements to be made in regards to a gift in a Will.
Whereas a gift is a fairly blunt instrument, a trust allows for a trustee to be placed in charge of the distribution of your gift to the beneficiary. The terms of the trust are governed by the Will, and only come into existence upon the death of the testator/testatrix (the Will-maker).
There may be a number of benefits in using Testamentary Trusts. Not least is the ability to organize more complex arrangements – in particular in the case of minors – to control the distribution of your property. The legal ownership of the trust is vested in the trustee, however the equitable right to the money is vested in the beneficiary. This arrangement can protect your money from creditors of the beneficiary, from malevolent third parties (eg parents / step parents), or from the beneficiaries themselves.
There may also exist some tax benefits in employing a Testamentary Trust in certain circumstances. A beneficiary under a Testamentary Trust can organize that their inheritance be shared between members of their own family. This means that the money could be distributed to those in the family with the lowest incomes, and thus the lowest marginal tax rates. In addition, a minor beneficiary receives trust income at normal adult rates, meaning they can take advantage of the tax free threshold.