Family Trust Estate Planning Queensland: Benefits, Risks and Control

General Information Only: This article is general information, not legal or tax advice. For advice specific to your circumstances, consult a qualified Queensland estate lawyer and, for tax matters, a registered tax agent.

Quick answer: A family trust does not usually form part of your estate. Assets held by the trustee pass to beneficiaries under the trust deed, not under your will. Estate planning for a family trust is mainly about controlling who becomes appointor and trustee after you die or lose capacity, alongside genuine but limited asset protection and tax benefits. This guide to family trust estate planning in Queensland explains how a family trust can be a useful tool for holding and distributing wealth across generations, and how it interacts with your will in ways that are easy to misunderstand. This article explains what a family trust actually does on death, who controls it, its real (and sometimes overstated) benefits, the tax and Queensland duty rules involved, and a practical checklist for aligning a family trust with your will and enduring power of attorney.

What Is a Family Trust?

A family trust is usually a discretionary trust: a trustee holds legal ownership of the trust’s assets and has discretion to distribute income and capital among a defined class of beneficiaries, typically members of one family. The trustee can be an individual or a company acting as a corporate trustee, and the person who created the trust, the settlor, generally has no ongoing role once the trust is established.

Structuring a trust well takes careful drafting to match the family’s circumstances and goals. Our guide on why creating a trust requires expertise and creativity explores what goes into getting it right.

Family trusts differ from fixed trusts, where each beneficiary has a set entitlement, and unit trusts, where beneficiaries hold “units” similar to shares. Discretionary family trusts are the most common structure for family wealth and small business ownership because of their flexibility, but that same discretion is exactly what beneficiaries and family courts scrutinise most closely.

A family trust also differs from a testamentary trust, which is created by a will and only comes into existence on death. See our guide to the Testamentary Trust for a full comparison.

The Key Point: Trust Assets Usually Don’t Pass Under Your Will

The most important thing to understand is that assets in a family trust are owned by the trustee, not by you personally, so they do not pass under your will. Your will can deal with your shares in a corporate trustee company, any loan account the trust owes you, and unpaid present entitlements, but it generally cannot gift the trust’s assets. That is why estate planning for a family trust is mainly about who controls the trust after your death or incapacity, not simply who inherits. In short: do trust assets pass under a will? Generally, no.

Because of this, families sometimes discover too late that a will carefully drafted to divide “everything” leaves trust assets completely untouched. If you want a family trust to benefit particular people after your death, the deed itself, not your will, needs to say so.

Who Controls the Trust After Death? Appointor and Trustee Succession

The appointor, sometimes called principal or guardian, is usually the most powerful role in a family trust deed because they can hire and remove the trustee. If succession to that role is not properly dealt with, control of the trust can pass to an unintended person or become disputed among family members.

• Appointor succession: check who becomes appointor or principal if you die or lose capacity, and whether the deed lets you nominate a successor.
• Trustee succession: confirm how a new trustee is appointed and removed, and who has that power.
• Corporate trustee shares and directors: if a company is trustee, your will may pass your shares and control of directorships, but that only controls the company, it does not gift the trust’s assets themselves.

These roles should be reviewed alongside your trustee’s duties and your enduring power of attorney, so someone you trust can step in if you lose capacity before you die.

Family Trust vs Testamentary Trust

Benefits of a Family Trust

Asset Protection

A family trust may improve asset protection in some circumstances because assets are held by the trustee, not owned personally. This can be relevant if a beneficiary is a business owner or professional facing potential lawsuits or creditor claims. However, trusts are not creditor-proof. Courts, bankruptcy trustees and the Family Court can scrutinise trust assets, particularly where a person controls the trust or transferred assets into it to defeat creditors.

Tax Efficiency Through Distributions

A family trust can receive investment income, rent or business profits and distribute portions to different beneficiaries, which can reduce the family’s overall tax bill where a beneficiary has a lower marginal tax rate. For example, distributing income to two adult children in lower tax brackets, rather than one high-income parent keeping it all, can reduce the combined tax paid.

Important: since the ATO’s focus on section 100A of the Income Tax Assessment Act 1936, a distribution to an adult child generally only stands up if the child actually receives and controls the money and uses it for their own benefit. Where the arrangement is not ordinary family dealing and a parent keeps or controls the cash, the ATO can disregard the distribution and tax it to the trustee at the top marginal rate. Document that the benefit genuinely flows to the beneficiary.

Distributing income to young children is far less useful than many families assume. Under Division 6AA, a minor’s unearned income is effectively tax-free only up to $416; income from $417 to $1,307 is taxed at 66%, and income above $1,307 is taxed at 45%. This is why testamentary trusts, which are generally excepted from these rules, are the usual tool for benefiting minors, not a family trust created during your lifetime.

Flexible Wealth Distribution

A discretionary family trust lets the trustee decide how much income or capital each beneficiary receives, year by year. This suits families whose needs change over time, for example funding one child’s university costs while supporting another through a temporary hardship, without needing to amend a will each time circumstances shift.

Generational Continuity

Family trusts can run for a long time. Under the Property Law Act 2023 (Qld), trusts created on or after 1 August 2025 can have a perpetuity period of up to 125 years, up from the previous 80-year rule. Older trust deeds may specify a shorter vesting date, so the maximum period is not automatically available and the deed’s actual vesting date should always be checked.

Risks and Limitations You Should Weigh

The benefits above come with real limits that are often understated. A spouse who is appointor and sole director of a corporate trustee may find that the Family Court treats trust assets as property of the marriage or as a financial resource in a property settlement, even though the assets are not legally owned by that spouse. A family trust also does not stop a family provision claim being made against your estate, and because trust assets sit outside the estate, they can reduce what is available to satisfy a legitimate claim, which can work against the very people the trust was meant to benefit.

Tax Treatment and Proposed Reforms

Making a family trust election with the ATO can allow the trust to access franking credits and certain tax concessions, but it narrows the class of beneficiaries who can receive distributions and can trigger family trust distribution tax if income is paid outside that family group.

A minimum tax on certain discretionary trusts, reported at around 30%, has been proposed federally with a suggested start date from 1 July 2028. This is not yet law and may change before or after introduction. A tax agent or solicitor should confirm the current status of this proposal before you rely on it in your planning.

Queensland Transfer Duty and Capital Gains Tax

Transferring land into, out of, or within a family trust can trigger Queensland transfer duty, commonly still called stamp duty. There is no general family exemption for these transfers; the Duties Act 2001 (Qld) exemptions administered by the Queensland Revenue Office are narrow and conditional, and are generally aimed at matrimonial transfers, deceased estates and correcting genuine errors, not gifting property into a discretionary trust. Transferring your family home into a trust will also usually cause you to lose the main residence capital gains tax exemption on that property. For the tax issues that affect beneficiaries after death, see our guide to inheritance tax in Australia.

As a concrete illustration, moving an existing property worth around one million dollars into a family trust can cost tens of thousands of dollars in duty, plus any CGT on the transfer, which is why trusts are usually best suited to acquiring new assets rather than restructuring assets you already own.

Loan Accounts, Unpaid Entitlements and Division 7A

Several trust-specific items are the ones your will can actually touch, and families are often unaware of them until it is too late.

• A loan account owed to you by the trust is often an estate asset that your executor can call for repayment.
• An unpaid present entitlement may be owed to you by the trust, or owed by you if a distribution has been made to you but not paid out.
• Beneficiary current accounts and unpaid entitlements can affect what is fair between beneficiaries and increase the risk of a family provision claim.
• Where a private company is involved, Division 7A of the Income Tax Assessment Act 1936 can apply to loans and unpaid entitlements between the trust and the company.

Trustee Responsibilities Under the Trusts Act 2025 (Qld)

The Trusts Act 2025 (Qld) sets out mandatory duties that generally cannot be excluded by the trust deed. A trustee must act with the care, diligence and skill of a prudent person of business (s 62), act honestly and in good faith (s 63), keep proper accounts and records for at least three years after the trust ends (s 64), and make those records available to beneficiaries on reasonable request (s 65). A trustee also generally has the powers of an absolute owner over trust property, including power to sell, lease, mortgage, deal with securities, settle debts and insure trust assets (s 82). A minor or a person who is an insolvent under administration can no longer be appointed as trustee (s 13). If your trust deed was drafted before this Act commenced, it is worth having it reviewed against the current provisions. See our guide on the role of a trustee in Queensland for more detail.

Setting Up and Maintaining a Family Trust

Drafting the Trust Deed

This usually requires a solicitor’s input. The deed sets out the trust’s name, trustee, beneficiaries, the appointor role, and the trustee’s powers, and must comply with the Trusts Act 2025 (Qld).

Choosing the Trustee

The trustee can be a family member, a professional trustee, or a corporate trustee. Whoever is chosen must be trustworthy and capable of managing the trust’s assets or delegating to appropriate specialists.

Funding the Trust

Property or cash is transferred into the trust. As explained above, this can trigger transfer duty or CGT, so it is worth checking the cost with a tax adviser before transferring existing assets.

Ongoing Administration

A family trust generally requires annual accounting, a trust tax return, and trustee decisions about distributing income and capital. Trust objectives should be reassessed as family circumstances change, including marriages, births and divorces.

Setting up a family trust involves legal fees and ongoing administrative and tax compliance costs each year. Whether the benefits outweigh these costs depends on the family’s assets, goals and risk profile.

Real-World Example: Multi-Generational Family Trust

James and Maria, both in their fifties, own a portfolio of investment properties and shares. James is a surgeon and wants some protection from potential future claims, they want to support their two children through university, and they want to provide for future grandchildren without handing large sums directly to minors.

They establish a discretionary family trust with a corporate trustee. Rather than transferring their existing investment properties into the trust, which would trigger transfer duty and potentially CGT on properties they already own, they direct new investments and surplus income through the trust going forward, while keeping their existing properties in their own names. Their children receive periodic distributions to cover tuition, generally taxed at the children’s own marginal rates once they are adults, and the trust deed allows the arrangement to continue for future generations under the current 125-year perpetuity rule, with appointor succession clearly documented so control passes as James and Maria intend.

Potential Pitfalls and How to Avoid Them

Estate Planning Checklist for a Family Trust

• Review the trust deed for control, powers and the vesting date
• Identify who is, and who will become, appointor or principal
• Review trustee succession and removal provisions
• Check who holds shares and directorships in any corporate trustee
• Identify any loan accounts owed to or by you
• Identify any unpaid present entitlements
• Consider whether a family trust election suits your circumstances
• Check for land or transfer duty issues before moving assets into the trust
• Confirm the deed’s vesting date against the 125-year maximum
• Align your will and enduring power of attorney with the trust structure — your attorney should know how the trust is controlled
• Consider the family provision claim risk for beneficiaries left outside the trust

When a Family Trust Might Not Be the Right Fit

A family trust adds an ongoing layer of cost, compliance and complexity that is not justified for every family. If your assets are modest, your family circumstances are straightforward, and you do not have significant business or professional liability exposure, a well-drafted will, testamentary trust for minor beneficiaries, and enduring power of attorney may achieve most of what you need at a fraction of the cost. A family trust is a long-term structure, and it is worth weighing the setup and annual running costs against the genuine, rather than assumed, benefits for your situation.

Frequently Asked Questions

Why set up a family trust as part of estate planning?

Mainly for ongoing asset protection, flexible income distribution among family members, and long-term control of family assets, not to gift assets through your will. Because trust assets sit outside your estate, the real estate planning task is making sure the right people control the trust after you are gone.

What are the benefits of a family trust?

Potential asset protection, tax-effective income distribution among adult beneficiaries, flexible distributions that can adapt to changing family needs, and the ability to hold assets for multiple generations. None of these benefits are absolute, and each depends on the trust being properly drafted and administered.

Is a family trust only for wealthy families?

No. While more common for larger estates or family businesses, families with modest assets can still benefit from the asset protection and flexible distribution a trust offers, though the setup and running costs should be weighed against the likely benefit.

Does a family trust avoid probate?

Assets already held in a family trust do not need probate, because they are not part of your estate; this is the same reason they do not pass under your will. A testamentary trust is different again: it is created by your will, so probate of your estate is still required before that trust comes into existence.

What are a trustee’s responsibilities?

Under the Trusts Act 2025 (Qld), a trustee must act with the care, diligence and skill of a prudent person of business, act honestly and in good faith, keep proper records for at least three years after the trust ends, and give beneficiaries reasonable access to those records. See our detailed guide on the role of a trustee in Queensland.

How do I wind up or get out of a family trust?

The trust deed sets out termination provisions, and the trustee will generally need to distribute remaining assets, pay any liabilities, and formally end the trust. This can trigger CGT events or transfer duty, so it should be planned with professional advice. See our guide to trust termination in Queensland.

What happens if beneficiaries disagree about a family trust?

Disagreements can arise over trustee decisions, distributions, or control of the trust, particularly after the person who controlled it dies or loses capacity. Beneficiaries have avenues to challenge a trustee’s conduct in some circumstances. See our guide on disputing a trust in Queensland.

How much does it cost to set up a family trust?

Costs generally include the solicitor’s fee for drafting the deed, any transfer duty or CGT if existing assets are moved into the trust, and ongoing annual accounting and tax compliance costs. Get a specific quote based on your assets and family circumstances before proceeding.

Conclusion

Good family trust estate planning in Queensland genuinely supports your wider estate plan, but it is not a substitute for a will and it does not simply pass to whoever your will names. The real work of estate planning for a family trust is making sure appointor and trustee succession are clearly documented, understanding what your will can and cannot deal with, and getting proper tax and duty advice before assuming a benefit will apply to your situation. Combined with a valid will, an enduring power of attorney, and regular reviews, a family trust can be a durable part of a wider estate plan rather than a source of unexpected control disputes or tax bills.

Key Takeaways

• Family trust assets are owned by the trustee, not you personally, so they generally do not pass under your will.
• Who becomes appointor and trustee after your death or incapacity is usually the most important estate planning question for a family trust.
• Asset protection and tax benefits are real but limited; courts and the ATO can look through arrangements that are not genuine.
• Distributions to adult children need to be genuinely received and controlled by them, particularly since the ATO’s focus on section 100A.
• Transferring existing property into a trust can trigger Queensland transfer duty, CGT, and loss of the main residence exemption.
• Review your trust deed, will, and enduring power of attorney together, ideally using the checklist in this article.

Related Resources

• Testamentary Trust Queensland: What It Is and When to Use One
• Role of a Trustee in Queensland: Legal Duties and Best Practices
• Trust Termination in Queensland: When and How to Wind Up a Trust
• Disputing a Trust in Queensland: Grounds and Legal Remedies
• Special Disability Trust Queensland: A Guide for Families
• Farm Succession and Estate Planning in Queensland
• Reviewing and Updating Your Estate Plan in Queensland
• How to Make a Will in Queensland: Legal Requirements & Step-by-Step Guide
• Inheritance Law in Queensland — complete guide

Sources

• Trusts Act 2025 (Qld) ss 13, 62–65, 82
• Property Law Act 2023 (Qld) s 201
• Income Tax Assessment Act 1936 (Cth) s 100A; Division 6AA
• Duties Act 2001 (Qld); Queensland Revenue Office transfer duty guidance
• Australian Taxation Office guidance on trust distributions, minor beneficiaries, and proposed trust tax reforms
• Succession Act 1981 (Qld)