Family trusts are not a “set and forget” structure. As families grow, circumstances shift and laws change, reviewing a trust becomes essential. Future-proofing ensures the trust continues to safeguard assets, minimise risks, and provide for future generations in the way it was originally intended.
Family Trusts Need Regular Review.
Family trusts can serve their purpose well for many years, but changing circumstances often mean they need reviewing. Specialist advice and careful planning are essential to ensure a trust continues to meet the needs of future generations.
Anne And Simon’s Story.
Anne and Simon had set up their trust when they owned a business twenty years ago. It had stood them in good stead over that time. Providing the asset protection that they had wanted, being business owners, and had provided some tax flexibility. The trust now owned significant assets. Including four commercial buildings, their family home and a relatively substantial share portfolio which was made up of the sale proceeds when they sold their business. Anne and Simon’s good friend, Dave, had been the independent trustee for many years. Dave was now wanting to retire as a trustee. He and his wife were spending more time overseas and often wasn’t available to sign documents. He had also heard horror stories of trustee liability and difficulties with beneficiaries.
A Trustee Looking To Retire.
Anne and Simon’s long-term lawyer was getting close to retirement and when they went to him to talk about Dave retiring as a trustee, he said he was doing less trust work as it had become a bit complicated and he suggested going to see a lawyer who specialised in trust matters. He gave them a recommendation, and they made an appointment.
Specialist Advice On Keeping Or Ending A Trust.
Initially the trust lawyer canvassed with them whether they wanted to keep the trust. She said that as the main driver of the trust had been creditor protection when they owned the business, they could look at simplifying their affairs. Anne and Simon agreed that simple was good, but they also liked the way the trust neatly ringfenced their assets. Especially as they were wary of the partner of one of their daughters, Molly. On more than one occasion he implied that Anne and Simon had significant funds, and he and Molly could do with more financial help. This raised concerns around the influence he had on Molly.
Concerns Around The Next Generation.
This was a key reason they wanted to keep the trust, even should they both pass away. They thought that the assets were significant enough to provide an income to their daughters, Molly and Liv, and that the capital could be passed on to their grandchildren or even great grandchildren. They talked this through with the lawyer, so she understood their concerns. The lawyer explained that sometimes when children were bound together in a trust once their parents had died, it could create some tension between them, especially if they had differing needs. In this case, Liv was more financially secure than Molly and might be happy to have some income, but it was likely that Molly would need money to pay off some debt.
Options For Greater Flexibility.
The lawyer said that another option would be to say in their memorandum of wishes that upon their deaths, their trust would be resettled onto two new trusts, one for Molly and one for Liv. They could give guidance as to how the trusts were to be established. Who would be trustees and who would be beneficiaries. This would be a way of continuing the protection for their girls without binding them together in a potentially less flexible way.
Preparing Trusts For Their Daughters.
Anne and Simon really liked this idea and went a step further. Asking the lawyer to prepare the trust deeds for the girls now. They thought then if they decided to distribute any funds to them in the meantime, the trusts would be ready and be able to be used immediately.
Ongoing Support And Guidance.
The new lawyer was also able to come on as a trustee, replacing Dave. She said that they would have regular meetings. This meant that they would keep assessing the role of the trust. Making sure that their wishes and wills were up to date. Anne and Simon were grateful for the practical, specialist advice they received.