Coacervates are partially hydrated, colloidal polymer droplets in water held together by hydrophobic interactions and are considered promising candidates for drug delivery applications. We present the first coacervates made from temperature-induced phase separation of aqueous poly(phosphoester) terpolymer solutions. Such coacervates are interesting for drug carrier applications as they are non-toxic, fully biodegradable and form spontaneously upon heating above a threshold temperature (lower critical solution temperature, LCST). The investigated poly(ethylene alkyl phosphonate) terpolymers are synthesized via the organocatalytic anionic ring-opening polymerization of cyclic phosphonate monomers. This way polymers with high control over molecular weight, terpolymer composition (and hence physical and chemical properties) and rather narrow molecular weight distributions (Ð < 1.30) are produced. The terpolymers bear functional pendant groups for further modifications and have a finely tunable balance of hydrophilic and hydrophobic side-chains randomly distributed over the whole chain, as proven by 31P NMR polymerization kinetics. These functional terpolymers spontaneously phase separate into a polymer rich coacervate phase in water upon heating above the LCST, providing an elegant method to prepare degradable and non-toxic carrier system.