Why a Family Trust?

Its strength lies in its ability to achieve several estate planning objectives within one structure.

A properly structured Family Trust can allow you to retain appropriate involvement in the management of your wealth during your lifetime, provide for your family, protect and preserve family assets, plan for incapacity, determine how and when beneficiaries access wealth, create continuity across generations and provide a framework for the eventual transition of your wealth.

It is also dynamic. Unlike an estate plan that only takes effect upon death, a Family Trust can begin working during your lifetime and continue long after you are gone. Depending on how it is structured, it can adapt to changes in your family and your circumstances over time, including marriage, divorce, the death of one spouse or provision for a special needs child.

Perhaps most importantly, assets that have been properly transferred into the Trust during your lifetime are not ordinarily required to pass through the succession process as part of your personal estate upon death. Instead, the Trust continues, with successor Trustees administering the Trust property in accordance with the Trust Deed.

This continuity is one of the defining advantages of a Family Trust: the person may change, the Trustees may change and generations of beneficiaries may change but the structure itself can continue.

It is this combination of flexibility, continuity and the ability to address multiple estate-planning objectives within a single structure that makes the Family Trust such a powerful estate planning tool.

What can a Family Trust help you achieve?

1. Protect and preserve family wealth

A Family Trust can create a separation between assets held personally and assets deliberately set aside as family wealth.

When properly structured, funded and administered, this separation can help protect and preserve family assets from risks arising from personal liabilities, creditor claims, lawsuits and matrimonial disputes.

The objective is to simply protect wealth today and to prevent assets accumulated for the family from being unnecessarily exposed, fragmented or depleted over time.

2. Provide for minor children and beneficiaries with special needs

A Family Trust allows you to create a structure for the long-term financial needs of people who may not be able to manage substantial assets themselves.

For minor children, the Trust can continue paying for education, healthcare, housing, maintenance and other needs until they are old enough to manage their own affairs.

It can also provide long-term support for a beneficiary with special needs. For example, instead of leaving a substantial lump sum directly to a child who requires lifelong care, the Trust can hold and invest those assets while the Trustees use the income and, where necessary, capital to meet the child's medical care, therapy, accommodation, insurance, education and day-to-day living expenses over time. This can help ensure that a beneficiary with special needs has the resources and support they need to live a secure, comfortable and dignified life, even when their caregivers are no longer able to provide for them.

3. Structure matrimonial assets more deliberately

Marriage — and particularly divorce or separation — can place significant strain on assets accumulated and owned by a couple.

Where spouses cannot agree on how matrimonial assets should be dealt with, the resulting court proceedings can be lengthy, costly and emotionally draining. They may also result in valuable family assets being sold, divided or fragmented in ways that neither spouse may ultimately have intended.

A carefully structured Family Trust offers another way of thinking about family wealth.

Rather than asking only, “Who gets the asset if the marriage ends?”, spouses can agree in advance on a structure that seeks to preserve certain assets within the Trust, particularly where the long-term intention is for those assets to benefit their mutual children.

For example, instead of a family property having to be sold or divided between spouses, it may remain within the Trust for the long-term benefit of the children, while the Trust Deed provides for how the spouses may occupy the property, receive rental income or otherwise benefit from it following separation, in accordance with the arrangements they have put in place.

The same principle can apply to income-producing properties, investments, shares in family businesses and other assets that the family would prefer to preserve rather than fragment.

In this way, the focus shifts from dividing the family wealth when the relationship changes to preserving the underlying wealth while determining how each family member may continue to benefit from it.

Where these arrangements are carefully considered and mutually agreed upon in advance, they can also reduce the number of issues that may later need to be determined through contentious matrimonial proceedings.

While a marriage may change, the structure around the family wealth does not necessarily have to.

4. Preserve family wealth after the death of one spouse

For couples who have spent years building wealth together, an important question is: what happens to that wealth when one spouse dies?

Without deliberate planning, assets accumulated jointly over a lifetime may eventually come under the control of the surviving spouse. Over time, circumstances may change. The surviving spouse may remarry, establish another family, make poor financial decisions or choose to deal with the assets in ways that were never contemplated when the couple originally built their wealth together.

The result can be that assets intended ultimately to provide for the couple's mutual children are depleted, disposed of or redirected to other persons, contrary to the couple's original intentions.

A carefully structured Family Trust can introduce safeguards against this.

While both spouses are alive, they can agree on which assets should be preserved as family wealth, how the surviving spouse should continue to benefit from those assets and what should ultimately be preserved for their children.

For example, after the death of one spouse, the surviving spouse may continue to live in the family home, receive income from investment properties or otherwise benefit from the Trust, without necessarily having unrestricted power to dispose of the underlying assets.

The Trust can therefore provide for the surviving spouse while preserving the underlying family wealth for the children and, where intended, future generations.

The death of one spouse should not mean the end of the family's original plan for its wealth.

5. Give children controlled access to wealth

Providing for your children does not necessarily mean giving them unrestricted access to substantial wealth at a young age.

A Family Trust allows you to determine how, when and for what purposes your children benefit. Their education, healthcare and other needs can be met while they are young, with greater access to or responsibility over the family wealth introduced gradually as they become older and more financially mature.

You can therefore provide generously for your children without handing them substantial wealth before they are ready to manage it.

6. Provide continuity of family wealth across generations

Without deliberate planning, assets accumulated by one generation can become increasingly fragmented as they pass from parents to children and eventually to grandchildren.

A Family Trust allows you to move beyond simply deciding who inherits what and instead create a framework for the long-term stewardship of family wealth.

Property, investments and other family assets can remain within a continuing structure for the benefit of successive generations, helping preserve the family's wealth rather than repeatedly dividing the underlying assets.

7. Provide continuity for family businesses

A successful family business can become particularly vulnerable when its founder retires, becomes incapacitated or dies.

Rather than allowing shares in the business to become fragmented among numerous individual beneficiaries, they can be held within a Family Trust and managed as part of the family's collective wealth.

This can help separate ownership, economic benefit and day-to-day management, allowing family members to benefit from the business without necessarily requiring every beneficiary to participate in running it.

8. Reduce dependence on court succession proceedings

Assets properly transferred into a Family Trust during your lifetime are held within the Trust structure rather than remaining part of your personally owned estate.

When you die, the Trust can continue. Successor Trustees take over its administration and continue managing the Trust assets in accordance with the Trust Deed.

This means that assets already held within the Trust do not ordinarily have to pass through the succession process as part of your personal estate, reducing your family's dependence on court proceedings before those assets can continue being managed for their benefit.

9. Keep family affairs more private

Succession proceedings can bring deeply personal family and financial matters into a court process.

A Family Trust allows many decisions concerning who benefits, how they benefit and how family assets are managed to be established privately within the Trust Deed and administered by the Trustees.

This can offer families a greater degree of privacy in the management and transition of their wealth than relying exclusively on court-administered succession.

10. Plan for incapacity

Estate planning should answer not only “What happens when I die?” but also “What happens if I am alive but unable to manage my affairs?”

If illness, accident or incapacity prevents you from managing assets already held within your Family Trust, other Trustees can continue administering those assets in accordance with the Trust Deed.

This creates continuity rather than uncertainty at a time when your family may already be dealing with difficult circumstances.

11. Create a more orderly succession and reduce the potential for family disputes

Many succession disputes arise because important decisions were never made — or were never clearly documented — during the asset owner's lifetime.

A Family Trust allows you to establish in advance who should benefit, from what, when and on what terms; who should manage the assets; and what should happen when circumstances change.

While no estate-planning structure can guarantee that a dispute will never arise, clearly documenting these intentions and putting the appropriate structures in place can substantially reduce uncertainty and the opportunities for disagreement.

The result is a more deliberate and orderly transition of family wealth, with fewer important decisions left for grieving family members to negotiate after your death.