Understanding Family Trust Succession Planning in Australia

Why Succession Planning Matters for Family Trusts

Family trusts are powerful tools for protecting and growing wealth across generations. But without a clear succession plan, they can become a source of confusion or even conflict when key decision-makers pass away or become incapacitated.

Who Controls the Trust?

The trustee is the legal controller of the trust’s assets. In most cases, the trustee acts according to the trust deed, which outlines how the trust should be managed.

However, the real power often lies with the appointor, the person or entity with the authority to remove and appoint trustees. If the appointor role is not clearly defined in your succession plan, control of the trust may fall into unintended hands.

Why the Appointor Role Is Critical

If the appointor dies without a nominated successor, the trust may become “frozen” or subject to legal disputes. This is especially problematic in blended families or business partnerships.

See: Should You Choose an Individual or Corporate Trustee?

Key Elements of a Strong Succession Plan

1. Appointor Succession
   Ensure your trust deed names a successor appointor or outlines a process for appointing one.

2. Trustee Continuity
   If you use a corporate trustee, succession is simpler—new directors can be appointed without changing the trust structure.

3. Beneficiary Clarity
   Clearly define who the beneficiaries are and how distributions should be handled in the event of death or incapacity.

4. Alignment with Your Will
   Your estate plan and trust deed should work together. A mismatch can lead to legal challenges.

Common Pitfalls to Avoid

• Failing to update the trust deed after major life events (e.g. divorce, death, business sale)
• Not documenting the appointor’s wishes for succession
• Assuming your will overrides the trust deed—it doesn’t

Tax Considerations in Succession Planning

If your trust has made a Family Trust Election (FTE), distributions outside the defined family group may trigger Family Trust Distribution Tax (FTDT) at 47%.

See: Family Trust Distribution Tax (ATO)

This makes it essential to:

• Review your FTE/IEE elections annually
• Maintain accurate records of your family group
• Seek advice before making distributions

See: Family Trusts in Australia – Tax Benefits and Strategies

Final Thoughts

Succession planning for family trusts isn’t just about legal compliance—it’s about protecting your legacy. A well-structured plan ensures your wealth is passed on smoothly and according to your wishes.

Need Help Reviewing Your Trust Deed?

Contact us to ensure your family trust is succession-ready.