Farm Succession Planning: What Happens When a Family Trust Guardian Becomes Incapacitated?
Farm Succession Planning in WA: What If the Guardian of a Family Trust Becomes Incapacitated?
For many Western Australian farming families, the family trust is a fundamental instrument in farm succession planning. However, challenges may arise if the individual central to that Trust, the Guardian, Appointor or Principal, loses capacity.
At Granich Partners, our agribusiness lawyers based in Perth frequently help families mitigate legal and tax risk by ensuring trusts are structured to withstand these kinds of events. Failure to consider incapacitation can cause significant disruptions to trust operations, often resulting in loss of control, unintended distributions, and increased tax liabilities..
Why the Guardian Role Matters in a Family Trust
A family trust is typically controlled by several key roles:
Trustee - Responsible for managing the trust and distributing income and capital.
Guardian - Holds veto power over major trust decisions, including distributing capital or amending the deed.
Appointor - Has the authority to appoint or remove trustees.
Principal (in some deeds) - May combine powers of both Guardian and Appointor.
If a Guardian becomes legally incapacitated, the trustee may be unable to act meaning they may not be able to distribute capital, make amendments to the Deed, or in some cases, even make basic income distributions. The result? Distributions may default to unintended beneficiaries, potentially attracting unnecessary tax consequences or causing tension between family members.
Why Enduring Powers of Attorney May Not Be Enough
It’s a common misconception that an Enduring Power of Attorney (EPA) solves the problem of incapacitation. Unfortunately, most EPAs do not automatically transfer Guardian, Appointor, or Principal powers to the attorney.
These roles are considered discretionary powers, much like a company director’s powers - not mere financial functions. That means unless your trust deed specifically provides for it, an EPA won’t give your attorney the authority to step in as Guardian.
How to Future-Proof Your Trust Structure
Most older Trusts do not address what happens when a Guardian or Appointor becomes incapacitated. This is why it is critical to:
Review your trust deed with an experienced estate and succession lawyer to ensure your Trust remains compliant with any changes in Trust Law;
Amend the deed (or prepare supplementary documentation) to allow an EPA to step into these roles on incapacity; and
Nominate a successor Guardian or Appointor, ideally someone familiar with your family’s succession plan and values.
This is particularly important for families that own a commercial operation, whether in the commercial sector or agribusiness sector., Assets and operations are complex, and keeping control within the family is essential for continuity across generations.
Get Advice from WA’s Trusted Farm Succession Lawyers
At Granich Partners, we specialise in succession planning for Perth and rural WA, helping farming families take control of their futures. If your trust deed hasn't been reviewed recently, or if you’re unsure if your Trust provides for if a Guardian becomes incapacitated, we can help.
Secure your family’s legacy today - speak to our experienced agribusiness lawyers about reviewing and updating your trust documents as part of a broader farm succession strategy.
Call us on (08) 9324 2111, email us on granich@granichpartners.com.au or simply complete the form below, and we’ll be in touch.