Your family trust carries on after you die or lose capacity, because the assets belong to the trust rather than to you. What falls vacant is your control of it. Who fills that vacancy is decided by your trust deed, not by your Will.
Why can’t your Will deal with your family trust?
Your Will can’t deal with your family trust because you don’t own its assets. Assets legally owned by the trustee of a discretionary family trust don’t form part of your estate when you die, so you can’t gift them to your loved ones under your Will.
Even though the assets may look and feel like your property, the trust owns them. The trust continues if you die or lose capacity and it keeps owning what it owns. The task isn’t passing on the assets, it is passing on control.
Which role has to be filled?
Both the trustee and the appointor roles need to be dealt with. The appointor, which your deed may call the principal or the guardian, can generally remove the trustee and appoint a new one, so whoever holds that role holds ultimate control. If you are the trustee and appointor, you need to make sure you have appointed an appropriate person as your replacement appointor. They can then appoint a new trustee.
How does control pass?
Control passes in whatever way your trust deed says. Each deed has its own specific terms so they need to be analysed specifically, but deeds take one of four common positions:
- the deed names a specific person to take over the control role automatically;
- the deed names your legal personal representative, meaning your executor or your attorney for financial matters, to take over automatically;
- the deed allows someone to nominate a person to take over, sometimes by Will; and
- the deed overlooked succession entirely and there is no plan at all.
Which one applies to you is crucial to your estate planning. It may effect whether your Will and your Enduring Power of Attorney have any effect on the trust and whether you need a deed of variation or a deed of successor. Those are questions we work through with you once we have read the deed.
Even if a deed lets you nominate by Will, a variation to the deed is usually the better route. A variation can deal with loss of capacity as well as death.
Why an old trust often has the wrong plan
A trust set up decades ago was planned around the family as it was then. Trusts commonly run for up to 80 years, so the person named as successor may have died, fallen out with the family or simply become the wrong choice.
The other thing that creeps up on an older trust is its vesting date. A trust doesn’t run forever. On the vesting day it ends, the assets have to be distributed and there are tax and duty consequences to that.
What if you can’t find the trust deed?
Start with your accountant, the lawyer who established the trust and the bank that opened the trust’s accounts, since one of them usually holds a copy. If you still can’t find it, seek advice from us early.
Frequently asked questions
Can I leave my family trust to my children in my Will?
No, because you don’t own it. What you may be able to pass on is control of it. Whether you can do that in your Will depends on the trust deed rather than on your Will.
Does the trust end when I die?
No. The trust continues and keeps owning its assets. It ends on its vesting day, which is set by the deed.
Do I need to change my trust deed?
Sometimes. Where the deed is silent on succession or names someone who is no longer appropriate, varying it may be the only way to get the result you want. We will read your deed and tell you whether it needs changing.
What happens if nobody takes over?
The trust is left without a functioning controller, which can stall distributions, tax returns and any dealing with the trust’s assets.
Send us your trust deed
The right strategy for your trust can only be answered from the deed. We will read the deed and recommend the steps that align the succession of your trust with your estate planning and your family objectives. Call the Wills team on (08) 9220 4433 or book an estate planning consultation to get started.
Related: how your family trust works and why you have one and estate planning for your related entities
This article contains general information about discretionary family trusts. It is not legal advice. You should obtain professional legal, taxation and financial advice about your trust and your estate planning.
