Family trusts remain one of the most common structures for estate planning and tax management in Australia. However, many people assume that once established, a trust can be left to run on autopilot. In practice, ongoing attention is critical. A missed family trust review could expose your estate to serious risks, particularly where a Family Trust Election (FTE) has been made and a key individual passes away.
In our experience, clients often overlook important compliance issues that can affect both the tax obligations of the trust and the effectiveness of their estate planning. Without proper review, these oversights can result in costly consequences for future generations.
Why your family trust may be at risk
Many families believe their trust will continue operating smoothly after the death of a key member. Yet when an FTE is in place, the definition of your ‘family group’ is frozen. This restricts who can receive distributions without penalty, regardless of how your family evolves over time. Importantly, you cannot nominate a new test individual. Unless your trust has been structured with foresight, you may find it locked into outdated rules with limited flexibility.
The risks of outdated trust deeds
Another important consideration is whether your trust deed reflects current Australian tax law. Many older deeds were drafted before modern reforms, including streaming rules, Division 7A compliance, and succession planning requirements. If your deed has not been updated, it may lack the necessary powers to manage income distributions effectively or could inadvertently trigger a resettlement.
In some cases, critical provisions are missing altogether. These may include clear streaming clauses, income definitions, or sub-trust arrangements. The absence of these powers creates confusion at year-end, increases compliance risks, and exposes trustees to potential disputes.
Unpaid entitlements and estate disputes
Another overlooked issue is how unpaid present entitlements (UPEs) and loan accounts are managed when a beneficiary or controller of the trust dies. Are there properly executed loan agreements in place? Do they satisfy Division 7A compliance requirements? If repayments are demanded—or forgiven—what will be the tax impact on the estate and other beneficiaries?
Poorly documented UPEs can lead to unintended tax liabilities, forced dividend payments, and even disputes among family members. Executors often face unnecessary complications simply because the trust’s records were not kept in order.
Integrating your trust with estate planning
The key takeaway here is that your family trust does not exist in isolation. It must be integrated with your Will, superannuation arrangements, and broader estate planning documents. Misalignment between these elements can undermine the effectiveness of your wealth transfer strategy, causing both tax inefficiencies and family conflict.
Questions to ask today
To ensure your structure is still working as intended, ask yourself:
- Has my trust deed been reviewed in the past five years?
- Does my trust deed include modern streaming and Division 7A provisions?
- Are all unpaid entitlements and loan accounts properly documented?
- Is my trust structure aligned with my Will and other estate planning documents?
- Am I confident my trust distributions won’t attract unexpected tax after my death?
Why professional guidance is essential
Looking ahead, trusts remain a powerful tool for wealth management and estate planning in Australia. But their effectiveness depends on regular reviews, legal updates and proactive planning. A family trust review can highlight outdated provisions, reduce compliance risks, and ensure your structure continues to protect your family as intended.
The Quinn Group has extensive experience in reviewing and updating trust deeds, managing Division 7A compliance, and integrating trusts with broader estate planning strategies. Our lawyers and accountants work closely with families to ensure their structures are both legally sound and tax effective for the next generation.
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NEED HELP? This article provides general information and should not be considered legal or tax advice. For personalised guidance, please contact our expert team of tax accountants at The Quinn Group by calling 1300 QUINNS (1300 784 667) or +61 2 9223 9166, or submit an online enquiry form to arrange an appointment.
