Family Trust – Guardian & Appointor Update

Guardian & Appointor update for Family Trust

The Guardian & Appointor can be updated and changed for many reasons. People may wish to retire as an Appointor & Guardian. Perhaps you would like to add your spouse as an additional Appointor & Guardian.  The Appointor & Guardian Update:

* removes Appointors & Guardians
* removes dead Appointors & Guardians
* confirms remaining Appointors & Guardians

Dead Appointors?

Example: Mum and Dad are the Appointors. Mum dies. Dad continues as the Appointor. Dad is happy to control the Family Trust by himself. Nothing in the Trust Deed or Mum’s Will states anything different. Therefore, all Dad is doing in the Appointor Update is formally removing Mum as Appointor. Mum’s executor or next of kin signs on Mum’s behalf. The Family Trust may have a system or procedure for dealing with dead Appointors.

Any Stamp Duty or CGT?

Stamp Duty is payable when assets are transferred from one person to another person. Capital Gains Tax is payable when you ‘dispose’ of an asset. However, by changing the Appointors you do neither. The class of beneficiaries remains the same. There is no change to the object or purpose of the Family Trust. There is generally no Stamp Duty or CGT payable in Australia.

Trustee vs Appointor

Who is in charge? Is it the Trustee that ‘owns’ the assets? No, the Appointor is god. The Appointor bosses the Trustee. The Trustee looks like it is in control, as it has the assets in its name. However, the Trustee takes it marching orders from the Appointor. The Appointor can sack the Trustee on a whim, for no reason at all. For example, the Trustee has nothing to do with this Deed of Variation. The variation relates to the Appointors only. The Trustee is not even party to the Deed of Variation.

Appointor, Guardian, Principal, Controller and other names for ‘god’

The wonderful thing about trusts is that they suffer very little meddling by the government. You are free to put into your trust deed pretty much anything you want. (That is why it is important to have a specialist law firm, like Legal Consolidated, prepare your trust deeds.)

There are two main persons in a Family Trust: ‘controller’ and the trustee. The ‘controller’ of the trust acts like a god. It can do whatever it wants. It ‘controls’ the trust. Depending on who prepared your Family Trust deed the ‘controller’ may be known by many different names:

1. Appointor
2. Guardian
3. Appointor and Guardian
4. Principal
5. Governor
6. Controller
7. Trustee (this is very uncommon, except for Deeds older than 1972)

Can the Appointor be BOTH mum and dad?

Yes, commonly mum and dad are each an Appointor together. You can have as many Appointors as you wish.

You can also have as many Back-up Appointors as you wish. The Backup Appointors are generally your children: ‘the union of Dad Full Name and Mum Full Name’.

Can the appointor be a company?

It is becoming more common to set up a company as a dedicated Appointor of a family trust. So, for example, mum and dad remain as Appointors, in the first instance. The company is the Back-up Appointor. You and your spouse own the shares in the company. (Obviously, the shareholders have ultimate control of the company, not the directors.) When you and your spouse die (i.e. once the Appointors die) your children inherit the shares in the Appointor company. Your children, get everything equally in your Will and therefore control the family trust via the control of the shares in the Appointor company. (This is an exemption to the rule that a Will should not control the family trust.) Commonly you would also have a Shareholders Agreement to lock in the rules. If the beneficiaries getting the shares are minors then the executor(s) in mum and dad’s Wills control the shares (and therefore the assets in the Family Trust). They can only act in the best interests of the minor children. (Whether you have a 3-Generation Trust Will the position is the same.)

To follow this strategy you and your spouse remain as Appointors. Your company is the Back-up Appointor.

Should a Will, 3-Generation Testamentary Trust or Testamentary Trust ‘control’ my Family Trust?

A Will gives away what you own. But you do not “own” the assets in your Family Trust. You may “control” the Family Trust because you are the Appointor. The correct way to deal with the succession of the Appointor is to build a Deed of Variation.

It is wrong and foolish to allow your Will (or any trusts formed under your Will) to control the succession of your Family Trust. The only way that you should update or direct who is the controller of your family trust is via a Deed of Update. This is the document you are about to start building. Just press the blue-button above to start the process. Read the hints as you build the document.

My children are under 18 years of age, can I still make them backup Appointors?

After the Appointor or Appointors all die (or go bankrupt or lose mental capacity) your Back up Appointors take over. If you have one child and expect more children then commonly the backup Appointors are “Child One Full Name” and “Unborn Children”. But what happens if the Appointors all die and there is only under 18-year-olds as the Back-up Appointors? That is fine. Their position is protected until they turn 18. In the meantime, the minor’s legal personal representative (guardians) hold that position in trust for those minors. However, the Court may direct another person to take charge of the Appointor position. But at all times that person or persons must always act in the children’s best interests. The assets in the Family Trust are protected for the minors.

If my spouse and myself both go bankrupt or lose mental capacity we lose control to our Back-up Appointors. Do we get it back when we come out of bankruptcy or regain mental capacity?

No, you do not get control of the trust back. There are bankruptcy risks to set up the Appointors succession plan in that way. Choose your co-Appointors and Back-up Appointors carefully.

Telephone us as you build the Appointor Update. We can help you answer the questions

Adjunct Professor, Dr Brett Davies, CTA, AIAMA, BJuris, LLB, Dip Ed, BArts(Hons), LLM, MBA, SJD
Legal Consolidated Barristers and Solicitors
Australia wide taxation and trust law firm
Mobile:     0477 796 959
Direct:      08 6389 0400
National: 1800 141 612
Email: [email protected]

See also:

1. Update the Family Trust just for Bamford streaming only:

2. Bamford streaming PLUS update the rest of the Deed:

3. Or update for Bamford streaming PLUS the Deed PLUS update the Appointor & Trustee:

4. Or just update the Trustee:

5. Or just update the Appointor:

To set up a new Family Trust Deed:

To prepare the Annual Trust Distribution Minutes:

1.  To deal with Division 7A (loan from your company to the Family Trust):

2.  Or, to forgive the ‘loan account’ and UPEs (loans from humans to Family Trust):

Change the name of your Family Trust:

To wind up and vest the Family Trust, when you no longer want it: