Family Trust Succession

Your family discretionary trust was probably set up by your accountant with the primary purpose being tax and income flexibility. As you age, your priorities will change, and if you are looking at a succession plan for your family trust (particularly if your business is run in your family trust), then your primary objectives have probably changed from wanting flexibility to now wanting some certainty.

family trust successionThe key roles in a family discretionary trust are usually:

  • the power to remove and replace the trustee which is usually the power held by the Appointor, and
  • the power to impose restrictions on the exercise of certain powers which is usually the power held by the Guardian or Protector.

Often these powers are held by the one person, or sometimes they are combined into the one role, but either way these roles are crucial to the control and management of the trust. So if you are the Appointor and Guardian under your family discretionary trust deed, have you considered who this role will pass onto if you retire, become ill or die?

Sometimes your trust deed will specify that your legal personal representative (your executor under your Will) will automatically take over your role as Appointor and Guardian. They would then have the power to appoint whoever they like into those roles, and essentially control the trust.

Otherwise, your trust deed will be silent on the issue, and you will need to make sure your Will appoints someone into those roles specifically.

Do you know what your trust deed says about the succession of the Appointor and Guardian, and does your Will address these issues?

In the event that you become ill or lose capacity, you should have an Enduring Power of Attorney that appoints someone who can act in your roles.

It should go without saying that you should be very careful about who you choose to replace you. If you are considering passing your family discretionary trust onto your children, maybe you should consider appointing more than one child into each of these roles jointly, so that no one person has complete control.

There are many options and things to consider when going through a succession plan, and we can help you through every step, and make alterations to trust deeds where necessary to achieve the certainty that you need for the future.