Most people who hold assets through a family trust understand that the structure offers tax flexibility and asset protection. What many do not realise is that controlling a family trust and owning its assets are two very different things.
It is one of the most commonly overlooked aspects of estate planning. If you have spent decades building wealth through a family trust, making the decisions, managing the investments and treating the assets as your own, it is only natural to assume they can be passed on through your Will. Legally, they cannot.
The fundamental problem with trusts and Wills
A discretionary family trust is a separate legal structure, meaning the trustee holds legal title to the trust's assets rather than you personally. This means that when you die, assets within the trust, whether that is a property portfolio, share investments or retained business profits, do not form part of your estate. As a result, they cannot be gifted through your Will and any attempt to do so will be legally ineffective.
A carefully prepared Will may deal with every personally owned asset, yet still leave unanswered questions about who will control a family trust after death. That is because the trust's assets fall outside the estate altogether.
What passes through your estate when you die is not the trust's assets, but control of the trust. How that control passes is an important aspect of estate planning and one that is often misunderstood.
The Appointor: the role that actually matters
To understand what happens to a family trust after death, it is necessary to identify who has the power to make decisions about it.
Beneficiaries do not own the assets held by the trust. They may receive income or other distributions, but they have no legal entitlement to the assets themselves. The trustee is the legal owner of those assets and is responsible for managing them in accordance with the trust deed.
Above the trustee sits the Appointor, who has the power to remove and replace the trustee at any time.
Essentially, whoever holds the Appointor role determines who manages the trust and how it operates.
Planning for the succession of a family trust is therefore about more than preparing a Will, it also involves ensuring that the Appointor role passes to the right person, in a way the deed recognises.
Where estate plans go wrong
How the Appointor role passes from one person to another depends entirely on the trust deed and this is where many estate plans fall short.
Some allow an Appointor to nominate their successor through a Will, while others require a separate legal document known as a Deed of Successor Appointor. The correct process depends on the terms of the trust deed. If those requirements are not followed, the appointment may be invalid. Put simply, a Will cannot override the requirements of the trust deed.
A further layer of complexity arises where a company acts as trustee. Unlike the trust's assets, the shares in that company do form part of the deceased's estate and are distributed in accordance with their Will. In some circumstances, the person inheriting those shares may also be able to appoint new directors of the corporate trustee under the Corporations Act 2001 (Cth). As the directors are responsible for managing the trust, this means the person inheriting the shares may also end up controlling it, even if that was never anticipated.
For this reason, a properly prepared estate plan must consider both the trust deed and the ownership of the corporate trustee. Looking at either document in isolation can produce an outcome that is very different from the one originally intended.
It is also important to review the trust deed's power of amendment (or variation clause). This determines who can amend the deed and the extent of those powers. If drafted too broadly, it may allow the trustee to change important provisions affecting control of the trust, including the operation of the Appointor role.
What the Courts have said
Australian Courts have repeatedly confirmed that these requirements must be followed strictly.
In Staley v Hill Family Holdings Pty Ltd [2025], the Queensland Court of Appeal confirmed that control of a family trust depends on the terms of its trust deed. In that case, the trustee was able to amend the deed, remove the existing Appointor and appoint someone else in her place because the amendment power permitted those changes.
The decision demonstrates that succession planning is about more than simply identifying who should become the next Appointor. It is equally important to understand whether the trust deed gives someone the power to change those succession arrangements in the future.
The incapacity problem most plans ignore
Most estate plans are designed around what happens after someone dies. Far fewer consider what happens if the Appointor is still alive but no longer able to make decisions because of dementia, stroke or serious illness.
If no provision has been made for incapacity, the trust can effectively freeze. No one has clear authority to make decisions and important matters such as distributions, investments and the management of trust assets may be delayed. In some cases, Court intervention may be required to resolve the situation, creating unnecessary cost, delay and uncertainty for the families and businesses involved.
A well-prepared estate plan considers incapacity as well as death. It documents a clear process for the Appointor role to pass to a nominated successor if the current Appointor is no longer able to act, providing continuity without the need for Court intervention or waiting until death occurs.
Bringing your estate plan together
Family trust succession is about much more than preparing a Will. It requires the trust deed, any succession documents and where applicable, the ownership of the corporate trustee to work together.
If those arrangements are not aligned, control of the trust may pass in a way that does not reflect your original estate planning intentions.
At Aubrey Brown Lawyers, our succession and estate planning team advises business owners and families on the legal and practical issues involved in family trusts.
