Who Really Holds The Power In Your Family Trust?
Who Really Holds the Power in Your Family Trust?
When it comes to succession particularly for farming families, rural landowners, and other agricultural operators, having a comprehensive understanding of the structure and the individuals who have control of your family trust is essential.
At Granich Partners, we work with clients to safeguard the future of their family business. Our goal is to help you navigate the complexity of succession and estate planning, ensuring that appropriate individuals are empowered at the appropriate time.
Understanding the Key Roles in a Family Trust
A discretionary family trust is a common tool in estate and succession planning, predominately in the agriculture sector and with families that hold significant property.. However, the positions of power in a trust as well as the implications of wealth transfer across generations, are not widely understood. H Below is a breakdown of the five significant positions of power:
1. Settlor: The Trust’s Initiator
The settlor is the person who creates the trust by paying a small nominal sum (typically $20) to the trustee, known as the settled sum. Once this is done, the settlor has no further involvement in the trust. Their role is purely administrative however it is essential to the legal creation of the trust.
2. Trustee: Manager of the Trust Assets
The trustee can either be a company, known as a corporate trustee, or one or more individuals. The trustee is responsible for overseeing and managing the trust’s assets and managing the day to day operations of the trust. The Trustee has the ability to determine:
what the trust does (e.g. investing, holding property, trading); and
The distribution of income and capital, including the timing of such distributions. .
3. Beneficiaries: Potential Recipients
Beneficiaries are individuals or entities eligible to receive distributions from the Trust. However, in a discretionary trust, beneficiaries have no automatic right to assets,only the possibility of receiving income or capital at the discretion of the trusteeThis discretionary structure highlights the importance of careful estate planning.
4. Appointor: The Real Power Holder
The appointor, sometimes referred to as the principal, has ultimate control of a family trust as they have the ability to remove and appoint the trustee if the trustee is not acting in the manner they desire. The Appointor effectively holds the ultimate power of the trust’s operation and its future direction.
It is integral to your succession plan to appoint an Appointor whose interest and views are aligned with your succession plan. This will help safeguard the interest of your trust and its beneficiaries.
5. Guardian: The Veto Power
Not all trusts have a guardian, however, appointing a guardian establishes another form of control inbuilt into your Trust. For example, the guardian’s consent may be required to:
distribute capital;
amend the trust deed; and
make structural changes to the trust.
In cases where trust structures often span multiple generations, including a guardian can be a strategic move to prevent mismanagement and to ensure oversight of the trust operations.
Why This Matters for Farming Succession and Estate Planning
Misunderstandings about who holds control of the family trust can result in conflict with respect to succession planning when it involves agribusiness’ and farming operations.
We have assisted families that have had improper structuring and trust documentation, to mitigate against potential disputes, inequity, and even litigation.
Work With Perth’s Leading Succession & Agribusiness Lawyers
At Granich Partners, we are proud to be Perth’s trusted advisors in:
Succession Planning for Farms & Agribusiness
Estate Planning for FarmingFamilies
Family Trust Structuring
Rural Property Law and Transactions
We’ve helped generations of West Australian families protect their land, business, and legacy through strategic legal planning - tailored to their unique situation.
Need clarity on who controls your family trust?
Speak with our team today. We’ll review your trust structure and help you implement safeguards that reflect and protect your wishes.
Call us on (08) 9324 2111 or Contact Us using the form below to request an appointment with one of our trusted solicitors.