LegalJune 26, 2020

Succession Planning in a Family Trust – is it possible?

Join Adjunct Professor, Dr Brett Davies for an interactive webcam and whiteboard session to unpack this important topic.

Many assets don’t go into your Will at death: joint tenancy, superannuation (well not automatically), cross-owned insurance and Family Trust assets (except for loan accounts).

Succession planning for the Family Trust is the most challenging. What happens if the Appointor does not die but becomes of unsound mind?

A Family trust is flexible for tax. Family Trust succession planning is not flexible. I love family trusts. They are flexible. Every year you hunt down family members with the lowest marginal tax rates. They are ‘discretionary’. The Appointor (god) tells the Trustee who gets the income each year. The 1. Trustee, 2. default beneficiaries and 3. general beneficiaries have no say in the matter. The Appointor is the only one in control. All these powers are subject to your trust deed – not legislation. The key roles in the trust deed are generally the trustee, with the day-to-day control, and the appointor who controls who the trustee is.

But what happens when the Appointor dies, gets sick, goes bankrupt (or insolvent if the Appointor is a company) or loses mental capacity?

All that mum and dad have, all that they can give is the right for the children to be the Appointors. The Appointor is where the succession planning starts and ends.

Acting unanimously;

The Appointor is the key role in the trust. This may not be appropriate for the next generation. Who is appropriate to have the power to control the trustee? Can that role be a joint role? If so, do decisions have to be unanimous or just a majority vote? Or could a new company be the Appointor? If so, who are the directors and shareholders of that new company? A good Family Trust deed makes the Appointors act unanimously. There is no other way. Otherwise, your two daughters will gang up on your son and take 100% of the Trust’s assets. Control is an absolute concept. It cannot be fractionally divided between the next controllers.

Can you distribute capital out of the Family Trust for free when you die?

There are many tax exemptions at death. There is generally a ‘roll over’ of CGT and stamp duty. Therefore, there is generally neither tax when the assets go from the dead person, to the executor and then to the beneficiary. But this does nothing to help the Family Trust. Family Trust assets don’t belong to the deceased estate. When you die nothing happens to the Family Trust. An Appointors death does not wind up or affect the trust. If your children are the Appointors they still can’t take the assets out of the Family Trust. If they do they trigger Captial Gains Tax.

Webinar Learning Outcomes:

How to update a Family Trust deed to deal with succession – without triggering CGT and stamp duty.

Suited to:

Practicing accountants, lawyers and business owners.

Presenter Bio:

Adjunct Professor, Dr Brett Davies. Legal Consolidated Barristers & Solicitors, National Australian law firm.

You will be provided with:

  • Supporting documentation
  • Webinar Recording to view multiple times for up to 6 months
  • An opportunity to ask questions to the presenter
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