Do I mention my Family Trust in my Will?

Family Trust and Wills

Family Trusts vs Wills – never the twain shall meet

Family Trusts have nothing to do with Wills. And Wills have nothing to do with Family Trusts. They have separate laws and tax rules. A Will gives away what you own. In contrast, you don’t ‘own’ the assets in your Family Trust you merely control the assets. To put in place a succession plan for a Family Trust build a “Deed of Variation to update the Appointor“.

When planning your estate with a Family Trust, it’s crucial to understand that the assets within the trust are separate from your personal holdings. Therefore, any attempt to distribute these trust assets through your Will fails.

Most of my assets are in my Family Trust

Q: My understanding is that the beneficiary’s spouse can claim the assets in my Family Trust. This is after I am dead and my child divorces. This is because such assets are not held by the trustees of the 3-Generation Testamentary trusts contained in my Will. And therefore are not protected by the Divorce Protection Trust.

It is difficult to move my assets from the Family Trust into my name or into my deceased estate. This is because of stamp duty, CGT, Unpaid Present Entitlements and Division 7A. It is also not good for asset protection.

Also, if you distribute the assets of the Family Trust, after I am dead, into my deceased estate then my Testamentary Trust loses the tax-favourable status for minor children. This is under section 102AG Income Tax Assessment Act.

However, in my case, the Family Trust has a company as the corporate Trustee. I own the shares in that corporate trustee. And, therefore, obviously, the shares in the company go into the Will. This is when I die. But that does not help me, either. This is because the Appointor in the Family Trust can sack the corporate trustee.

My last option is that I get my children’s spouses, as they come and go, to sign Binding Financial Agreements. Obviously, that only works while I am of sound mind and can keep changing my Will. Also, it seems that Binding Financial Agreements do not work anyway.

A: You are correct. It is almost impossible to fight the Family Court. Consider:

  1. somehow getting your wealth out of the Family Trust into your name, before death. Then it goes into your 3-Generation Testamentary Trust Will. And is then protected by the Divorce Protection Trust.
  2. changing the Appointor clause in the Family Trust.

And do not forget the Unpaid Present Entitlements. This is money owed by the Family Trust to a beneficiary. If you are owed money by the Family Trust then this money belongs to you. It obviously then gets into your 3-Generation Testamentary Trust Will.

Protects from death duties, divorcing and bankrupt children and a 32% tax on super.
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