Why families must take back control of their structures

For decades, trusts have been a cornerstone of wealth structuring for Australian families and business owners. They were established with a clear purpose, giving families flexibility, protection and a framework for managing tax efficiently.

Many trusts have quietly done their job in the background, year after year, rarely questioned and seldom visited, but that era is ending.

Today, trusts sit at the intersection of heightened regulatory scrutiny, generational change and shifting family expectations. The Australian Taxation Office (ATO) has made it clear that family trusts are a firm focus, particularly how income is distributed, documented and ultimately enjoyed. This is not a temporary campaign; it reflects a broader shift in how wealth structures are viewed and assessed.

For families, this moment represents both a risk and an opportunity. The risk lies in complacency, and the opportunity relies on using the scrutiny as a catalyst to step back, reassess, and ensure that structures genuinely serve the family’s long-term vision.

Much of the current attention centres on a certain section of the tax legislation where, if a trust distributes income to a beneficiary, that beneficiary must receive the benefit of that distribution. For years the mechanics were often treated as technical detail, managed quietly by accountants at year-end. The assumption was that compliance sat with advisers, not with the families themselves and now, that assumption no longer holds.

The ATO’s renewed focus makes it very clear that trustees and beneficiaries are accountable, and if distributions are made without being honoured, the consequences are not only financial but reputational. When this occurs, the tax consequences can be severe, with the resulting stress often felt deeply across families.

More importantly, this scrutiny exposes a deeper issue. Many families do not fully understand the structures they rely on and simply trust them because they always have. As oversight increases, trust on its own, without proper understanding, leaves families exposed.

One of the most common mistakes I see is treating trusts purely as tax tools. Tax matters, but it is not the purpose of a trust. It is fundamentally a governance framework and determines who controls assets, who benefits from them and how decisions are made over time. When we look at them with this in mind, many long-standing arrangements begin to look misaligned, and beneficiaries may no longer reflect the family’s reality. Control may sit with individuals who are no longer best-placed to exercise it and documentation often has not kept pace with changes in family dynamics, wealth levels or legislative expectations.

This is also particularly relevant for business owners, many of whom operate through discretionary trusts and distribute income to corporate beneficiaries. While these structures can be appropriate and effective, they demand discipline and a clear understanding of the rules governing distributions, entitlements and cash flow. When language and treatment become casual, scrutiny inevitably follows, which is why precision is essential.

The real question that families should be asking isn’t whether their trust is tax-effective, but more whether it is fit-for-purpose today.

Overlaying all of this is the reality of intergenerational wealth transfer. Australia has entered the largest transfer of wealth in its history, and it is happening earlier and more actively than previous generations. Families are no longer waiting until estates are settled before wealth moves to the next generation. They are helping children into homes, supporting education, funding business ventures and sharing responsibility while they are still present and engaged.

This shift reflects longer lifespans, greater wealth accumulation and a desire to see impact, not just have the intention of it. However, this can place pressure on structures that were never designed for this level of activity. Trusts established 30 or 40 years ago are now expected to support grandchildren, blended families and complex succession scenarios. Many are approaching the limits of their legal lifespan and in most states, where trusts effectively run for around 80 years, that horizon is no longer abstract.

Without proactive planning, families may find themselves rushed into restructures with unintended tax consequences. This is not a problem for the next generation to solve; it is a responsibility of the current one.

One of the least understood yet most powerful roles within a trust is that of the Appointor. The Appointor controls who acts as a trustee and therefore who ultimately controls the trust. In many families, this role was assigned decades ago and never revisited.

As families age and complexity increases, this can create significant risk. Sole control may be inappropriate and informal understanding may not withstand stress or incapacity. The absence of a clear succession plan for control can unravel decades of careful planning.

Revisiting Appointor arrangements is not about surrendering control but about ensuring continuity, balance and resilience. In some cases, this may involve shared control and in others it may involve a corporate structure that reflects collective responsibility rather than individual authority.

Trust conversations inevitably lead to estate planning, and this is where many families discover uncomfortable gaps. A will governs personal assets, not trusts or companies. Powers of attorney are critical in cases of incapacity, yet they are often outdated or absent altogether. The assumption that these matters can be dealt with later is one of the most damaging myths in private wealth. Incapacity does not arrive with notice so, without proper documentation, families are left navigating uncertainty at the worst possible time.

Effective estate planning is not about predicting outcomes but about preparing for them. It requires clarity of intent, robust documentation and the willingness to have conversations that are often avoided. Perhaps the most meaningful shift we are seeing is the involvement of the next generation earlier in the process. The families who navigate transition well are not those with the most complex structures, but those with the clearest communication.

Wealth plans should be conversations, not surprises, so when children understand the reasoning behind decisions, they are far more likely to respect the outcomes. This does not mean handing over control prematurely, it means building financial literacy, stewardship and shared understanding over time.

The greatest threat to wealth is rarely market volatility. It is misalignment between people. Families must re-engage with their structures, understand them and ensure they reflect who they are today, not who they were decades ago. It is a leadership opportunity for families and business owners, as it requires moving beyond delegation to active stewardship: asking better questions, engaging advisers earlier and involving families thoughtfully.

Peter Leggett
Chairman of Arrow Private Wealth

Originally published by The Golden Times. Read the article here.