Discretionary Trusts and Family Trusts in your Will
It is increasingly common for people from all walks of life to hold assets in a family trust or a discretionary trust. If you are one such person, then you must give serious thought to what will happen to the trust in the event of your death. A trust is a separate legal entity and the trust assets do not form part of your estate so cannot be distributed under the terms of your will.
Indeed, subject to the terms of your trust deed, your family trust or discretionary trust may continue for many years after your death. However, just because the trust assets will not form part of your estate, does not meant that you can’t exercise some influence on the future control of the trust in your will.
The day-to-day operation of the family trust or discretionary trust is the responsibility of the trustee. The powers of the trustee are detailed, often at great length, in the trust deed. You may be a trustee in your own personal capacity or jointly with another person. Alternatively, a company of which you are a director may be the trustee.
The trust deed usually sets out the procedure for replacing a trustee, including upon the trustee’s death. If you are the sole trustee of the trust in your personal capacity it quite common for the trust deed to stipulate that your executor of your will becomes the trustee. If you are a joint trustee, then it is normal for the trust deed to say that the surviving trustee(s) will continue upon the death of one of them.
In the event that the trustee of your family trust or discretionary trust is a company matters can be quite different. The company will continue to exist irrespective of your passing and usually the majority shareholder(s) of the company will determine who the directors of the company are and those directors will control the trustee. Accordingly, you should take into account what happens in you will to any shares that you own in the trustee company upon your death as this will usually determine control.
One of the lesser known but possibly more important roles in a family trust or discretionary trust, is the appointor. In most trust deeds, the appointor has the power to remove and appoint trustees with little fetter upon their power.
If you hold the role of appointor, it is vitally important to consider whether the trust deed gives you the power to nominate a new appointor in your will.
When preparing your will, aside from control of your family trust or discretionary trust, you should also consider the impact being (or not being, as the case may be) a beneficiary under the trust may have upon people you are considering as beneficiaries under your will. It may be that beneficiaries of the trust will receive a windfall and you may wish to take this into account when determining if they should be a beneficiary under your will or to what extent they receive estate assets under your will.
As with all areas of estate planning and will drafting, matters can become complex very quickly and seemingly minor oversights can have very large unintended consequences down the track. To get advice from expert estate planning lawyers, please call Certus Legal Group on 07 3106 3016 or contact us using the form on this page.
This article does not give legal advice and should not be relied upon as such. It is intended to provide general and summary information on legal topics, current at the time of first publication. You should seek professional legal advice before acting or relying on any of the content contained herein.