Family Trust, Companies & SMSFs

You may hold substantial assets in your family trust or private company. It is therefore important that the estate planning for these entities is properly considered to ensure that the control of these entities (and their underlying assets) passes to the people that you intend on your death or incapacity.

Without turning your mind to these important considerations, the control of these entities (and their underlying assets) may end up in the wrong hands. That person could then administer them for their own benefit, rather than for the people who you may have intended to benefit.

The Trustee is responsible for the day to day management of the Trust. They decide how the funds are invested and are responsible for distributing the trust assets to the beneficiaries in accordance with the terms of the Trust Deed.

The Appointor (sometimes called a ‘Principal’) is responsible for ‘hiring and firing’ the Trustee of the Trust. Depending on the terms of the Trust Deed, the Appointor may have the power to remove the Trustee and appoint an additional or replacement Trustee (with or without the consent of any other person).

The Appointor is, therefore, the most powerful position of control when it comes to a Family Trust. You need to consider who will become the Appointor of your Family Trust if you pass away or lose capacity. Estate First Lawyers can assist you in this regard.

The terms of the Trust Deed will generally set out who will have control of the Trust if you pass away, which may not be who you intend. Deciding who you wish to control your Trust if you pass away is an important estate planning consideration as the person who has control of a discretionary trust can usually distribute income and capital to themselves to the exclusion of others. The Trust Deed should be reviewed from an estate planning perspective to ensure that these provisions are adequate and appropriate for your circumstances.

Estate First Lawyers have a range of strategies available to ensure that the control of the trust passes to the right people on your death or incapacity.

You can gift your shares in the company under your Will to your desired beneficiaries. Depending on the terms of the constitution, the beneficiaries may then exercise your voting rights as a member of the company. The company constitution should be reviewed from an estate planning perspective to ensure that these provisions are adequate and appropriate for your circumstances.

Estate First Lawyers have a range of strategies available to ensure that the control of the company passes in the manner that you intend on your death or incapacity.

You should think about who is suitable to carry on your business after your death. For example, if you have children, it may be that only one child is best placed to carry on your family business. Estate First Lawyers can assist you with passing on control of your business entity to that child while ensuring that appropriate adjustments are made for your other children, if appropriate. This will ensure that the child who obtains control of your business entity does not receive a ‘windfall’ at the expense of their siblings (unless of course you wanted them to).

If you run your business with a business partner (such as a third party), you may also wish to consider a shareholder’s agreement or buy/sell agreement as well as key person insurance. We can provide you with further advice in this regard.

Appointing a company as Trustee of your Family Trust has a number of benefits. If the Trust is likely to be exposed to investment or business risk, having a corporate Trustee in place can offer better asset protection than if you were acting as a Trustee in your personal capacity. A corporate Trustee also helps to better distinguish the Trust assets from your personal assets which can be advantageous from an administration point of view.

Having a corporate Trustee also provides for better succession of your family Trust if you pass away, as you can leave your shares in the corporate Trustee to your desired beneficiaries and the actual ownership title of the Trust assets do not need to change.

We can advise you on whether a corporate Trustee is right for your circumstances and can assist you with incorporating a Trustee company and changing the Trustee of your Family Trust if required.