What is a Family Trust?
A discretionary trust is often called a family trust when the beneficiaries are related by blood. It is one of the most common trust types in Australia. It holds properties for beneficiaries who are given discretionary authority over the distribution of income.
A trust is a relationship: In this relationship, a trustee, whether an individual or a company, manages business activities. These activities are managed for the advantage of others, known as beneficiaries. Trusts can be discretionary. They allow the trustee to decide how profits are allocated among beneficiaries. Alternatively, trusts can have fixed interests, benefiting specific individuals in set proportions. Understanding how a trust functions is essential when deciding whether to appoint a corporate trustee for a family trust. This article discusses the workings of a family trust and the advantages of choosing a corporate trustee.
Understanding how a trust functions is essential when deciding whether to appoint a corporate trustee for a family trust. Discretionary trust assets generally do not form part of a deceased estate because the trust, not the individual, owns them. Control passes via the trust deed, often to a named successor (appointor) or the executor, rather than through a Will. Proper planning ensures trustees, not beneficiaries, manage these assets.
Discretionary Trusts in Estate Planning
Control vs. Ownership: Normally when a Trustee dies, they lose control of the trust. Yet, the assets do not transfer into their personal estate. The trust deed specifies who serves as the new trustee or appointor.
Passing Control: The roles of Trustee and Appointor must be passed on. The Appointor can hire or fire the trustee through the trust deed or the deceased’s Will.
Testamentary Trusts: A discretionary trust can be established within a Will (testamentary trust) to hold assets for beneficiaries. This provides asset protection. It also offers tax flexibility.
Deceased Estates and Trust Income
Distributions: A deceased estate is typically not a beneficiary of an existing discretionary trust. Still, the trust deed can sometimes be amended to allow this.
Income Streaming: Testamentary trusts are beneficial. They allow beneficiaries to get income taxed at lower, individual rates. This is more helpful than top-tier tax rates, especially for minors.
Executor’s Duties: The executor must recognize and pay liabilities, and manage trust assets according to the Will’s wishes.
Key Considerations
- Review Trust Deeds: The trust deed must be reviewed to understand how the appointor’s role is transferred on death.
- Protecting Assets: Discretionary trusts (especially testamentary ones) can protect a beneficiary’s inheritance from bankruptcy or divorce.
- Tax Implications: Testamentary discretionary trusts offer significant tax advantages for high-income beneficiaries.
There is a recurring moment in succession law where intention collides with structure.
A commercially sophisticated Will maker, provides in a Will exactly who should get what. The document reads clearly enough. The family understands it. On its face, it feels fair.
And yet, when the matter reaches court, the answer is simple — and unforgiving:
You can’t give away what you do not own.
That is the central lesson from Di Trapani & another v Di Trapani & others [2026] QSC 2. The case concerns the estate of Elizabeth Anne Di Trapani (the deceased). Her Will attempted to distribute assets that, legally, were owned by the trust.
A familiar structure, an unfamiliar problem
The deceased died in November 2023. Her Will, made in 2010, was prepared not by a lawyer but by the family accountant.
As noted by McCafferty J, the accountant reasoned,
“that he was ‘entrusted’ with the deceased and her husband ‘s Wills for various reasons, including that the late couple held a belief that legal disputes would be expensive and take time to resolve.”
That fact is not incidental. The document reflects a practical, almost commercial approach to succession. This approach assumes that controlling a structure is equivalent to owning its assets.
Like many family business arrangements, the deceased’s wealth was not held personally. It sat within a familiar architecture:
- a discretionary family trust
- a corporate trustee
- operating companies and intercompany loans
The Will, though, treated that structure as if it were transparent.
It purported to gift specific properties — a shed at Kedron and units at Chermside — to particular family members. But those properties were not owned by the deceased. A trustee company held them.
That distinction proved decisive.
The illusion of control
The Court’s reasoning is orthodox, but its implications are often misunderstood in practice.
The deceased held shares in the trustee company. Had long been involved in the family’s affairs. The deceased’s children were directors. From a practical perspective, there was control.
But in law, control is not ownership.
The trust assets belonged to the trustee. They were to be administered according to the trust deed. These assets did not form part of the estate. And the Will can’t compel the trustee to distribute them; or as an indirect mechanism to achieve that result. The Court did not accept that gifting shares in the trustee “armed” the executors with power. This power would allow them to extract trust assets for testamentary purposes.
The consequence was stark:
The gifts of the trust properties failed.
Where the Will still worked
Not everything collapsed.
The shares in the trustee company passed effectively to the executors. That outcome was consistent with the family’s long-standing management of the structure. It did not create any obligation. It also did not grant the power to reallocate trust assets according to the Will.
Other provisions were treated in the same disciplined way.
A clause seeking to prevent intercompany loans from being enforced was held to be no more than a wish. A testator can’t, by Will, compel separate corporate entities to forgive debts.
By contrast, the clauses provided a son with $400,000. An extra $400,000 was given if no debt existed. They were given their full literal effect. Words matter. The Court treated them as conferring $800,000. A clause referred to “my debts.” It did not extend to a liability where the deceased was merely a guarantor at death. Legal characterisation prevailed over informal expectation.
The deeper pattern
Cases like this are not really about construction.
They are about misalignment.
The Will expresses one idea of ownership — intuitive, relational, grounded in family understanding.
The law applies another — formal, structural, and indifferent to intention unless it is properly implemented.
Where those two diverge, the structure wins.
What is striking in Di Trapani is not that the Court applied settled principles. It is how easily a sophisticated family arrangement can produce a Will that can’t function as intended.
The quiet risk in modern estates
This problem is becoming more, not less common.
Increasingly, wealth sits outside the individual estate:
- discretionary trusts
- private companies
- unit trusts and hybrid structures
- digital assets and platform-held value
And yet, testamentary documents are still often drafted—or assumed—to function across the entire economic reality of the person.
They do not.
A Will speaks only to the property of the testator and to powers properly exercisable by the Will. Everything else must be addressed through the structure itself. This includes control mechanisms, appointor roles, shareholdings, director succession, and carefully aligned governance documents.
A final reflection
There is a tendency to think of a Will as the centerpiece of succession.
In truth, for many modern estates, it is not.
It is one instrument in a wider system — and sometimes not even the most important one.
The real question is not “what Will the Will say?” but:
“Does the legal structure allow the Will to work?”
In Di Trapani & another v Di Trapani & others [2026] QSC 20, the answer was no.
And that answer, once given, leaves very little room for intention to rescue the outcome.