5 Reasons Why Family Trust Succession Should be Structured Outside a Will

I completely understand the temptation to simply insert an additional clause into a client's will to address the succession plan for their family trust. It is quick, does not require any additional documents, and you do not have to confront an uncomfortable conversation with clients about extra costs. However, this approach is far from the gold standard for discretionary trust succession.

Here are the five reasons why family trust succession should be structured outside a will:

1. Trust Assets Cannot Be Gifted Under a Will

There is a misconception that assets in a trust, such as an inter vivos family or discretionary trust, can simply be gifted under the testator’s will. When working with clients who have a family trust, it is important to clear up any confusion they might have.

The assets of the trust are not technically theirs; therefore, they cannot be gifted under their will. The trust continues to exist, and the assets remain within that trust.

Di Trapani & another v Di Trapani & others [2026] QSC 20 is an excellent reminder of the perils of attempting to gift assets owned by a discretionary trust under a will. In this case, the testator's will contained a specific gift of particular properties. However, the properties were owned by a family trust, not the testator.

The court held that it cannot order a construction of the will such that the trustee of the trust is bound to transfer the properties to the beneficiaries in the will.

This particularly broke my heart because the clients had their will prepared by their accountant. The accountant gave evidence that they retyped the document from an earlier draft will to update it.

I found this passage from the judgment particularly ironic: "Nor is there any evidence that Mrs Di Trapani had the benefit of legal advice prior to executing her will. It seems unlikely that any advice was sought or received. In one of the documents provided, the accountant stated that he was ’entrusted’ with Mr and Mrs Di Trapani’s wills for various reasons including that the late couple held a belief that legal disputes would be expensive and take time to resolve."

2. Trust Beneficiaries Cannot Be Replaced Under a Will

If a beneficiary of the trust dies, the trust continues and the assets continue to be owned by the trustee for the trust.

Think of it like this – even though the assets in the trust may look and feel like your property, the trust is its own entity.

It “keeps going on” even if the client dies or loses capacity (a bit like the British royal family – even though Queen Elizabeth II has passed away, the monarchy itself endures with a different figurehead at the helm).

Remember that the beneficiaries of the trust do not have any certainty about whether they will benefit from a discretionary trust, so it is up to the trustee to make decisions that are in the best interests of all the beneficiaries.

3. Trust Controllers Can Be Replaced Under a Will Only If Authorised Under a Trust Deed

If a client dies in their capacity as a controller, whether as a trustee, appointor, or principal guardian, the vacancy has to be filled to manage the trust. However, the requirement is that this must be authorised in the trust deed.

If a successor has to be nominated in a will, the trust deed must expressly allow it. One cannot simply insert a clause nominating a successor to take over upon death without verifying whether the deed provides the power to do so via a will. If the trust deed does not include a power permitting a controller’s successor to be nominated by their will, then the will and the enduring power of attorney will have no impact on the trust.

4. A Will Only Deals with Death

A will only takes effect upon the death of the testator. However, a controller can be removed due to multiple scenarios, including loss of capacity or disqualification triggers in the deed (such as bankruptcy or a relationship breakdown).

By using a will, you are not addressing the other reasons why a controller role may become vacant. You are planning for only one event, which is death, leaving no plan for incapacity or bankruptcy. This is a significant issue when relying solely on a will.

5. Privacy and Disclosure Risks

Any document creating a succession plan for a family trust becomes a trust document. By including these instructions in a will, the will itself becomes a trust document, exposing it to the disclosure obligations attached to trusts.

There is a technical argument that the will might need to be disclosed to third parties, such as banks, when they request documents constituting the trust terms. This is less than ideal from a privacy perspective, as wills typically contain lots of confidential family and financial information unrelated to the trust. This reinforces why using a will is not the gold standard.

3 Strategies for Dealing with Family Trust Succession

Like snowflakes, all trusts are unique and how your trust works depends on the terms set out in your particular trust deed (the ”rule book” for the trust).

However, here are three “gold standard” strategies for managing family trust succession:

1. Deed of Successor

A deed of successor is a separate trust document created independently of the will. In this document, the current controller nominates their successors.

Advantages:

• Comprehensive: It can cover all disqualification events set out in the trust deed (i.e. death, incapacity, bankruptcy, relationship breakdown, or absence).

• Contingency Planning: You can name multiple successors to allow for different events (e.g., if Person A cannot act, Person B takes over). You can even develop sophisticated contingency planning to define rules for joint appointments (e.g. Person A and B shall act jointly, however if Person A cannot act, then Person C shall fill their vacancy and if Person B cannot act then Person D shall fill their vacancy to act jointly with Person A or C).

• Privacy: It minimises the confidentiality issues which arise when dealing with succession of the trust in a will, as a deed of successor only contains terms relating to the trust.

Disadvantages:

• Extra Work: It is an additional document that requires client education and results in higher fees for the additional drafting.

• Power Required: The trust deed must expressly allow for a successor to be nominated under the deed of successor.

2. Deed of Variation

If the trust deed does not contain an express power permitting controller succession to be managed under a deed of succession, then a deed of variation can be prepared to update the trust deed itself to include the necessary succession powers. Once the powers have been included in the trust deed by the deed of variation, the deed of succession can then be prepared.

Advantages:

• Modernisation: It allows you to bring an older trust deed up to date with current standards, including inserting default successor mechanisms and definitions.

• Customisation: You can insert specific disqualification events and default successor mechanisms tailored to the clients’ needs.

Disadvantages:

• Depends on the powers within the original deed: Obviously this pathway is not viable if there is no valid variation power within the original deed.

• Drafting Complexity: Incorrect drafting (such as varying a schedule when not permitted) can render the variation ineffective, as seen in various recent court cases (for example, see Jenkins v Ellett and Mercanti v Mercanti).

3. "Proactively Doing Nothing" Approach

It is not always necessary to prepare additional documentation to deal with the succession of a family trust. Many modern trust deeds already contain existing default successor mechanisms in the trust deed. For instance, the deed may specify that the current appointor’s legal personal representative (i.e. executor or attorney for financial matters) will automatically replace them in the event of particular disqualification events.

If the deed contains this mechanism and the default successor is appropriate and aligns with the client’s objectives for the trust, then it is completely acceptable to rely on this existing mechanism within the deed and prepare no additional documentation for the succession of the trust.

Advantage:

• Simplicity: It is affordable and requires no new documentation if the existing deed is robust.

Disadvantage:

• Not Comprehensive: Older deeds often lack adequate default mechanisms. Failing to ensure there is an appropriate plan for the trust succession may require an expensive court order, or the family may unexpectedly find that their trust is suddenly controlled by the public trustee.

The Gold Standard

The gold standard for family trust succession is the Deed of Successor. It provides the most comprehensive and private method for ensuring a seamless transition of control across all possible scenarios.

The principles in this post also apply to the succession of testamentary discretionary trusts (TT), reiterating the importance of using a well-drafted precedent when establishing TTs that are intended to be used as long-term wealth accumulation vehicles over many generations.