Most families do not think about this until they have to. Mum or Dad has been running the family trust for years without issue. Then comes a diagnosis, a sudden health decline, or a quiet observation from a GP, and the question nobody planned for suddenly becomes very real: who is actually in charge of the trust now?
The answer is rarely simple, and the consequences of not having a plan in place can ripple through the entire family. Here are seven things that commonly go wrong, and what you can do about each of them.
1. The Trust Effectively Freezes
When a trustee loses mental capacity, they can no longer legally make decisions. The trust does not pause gracefully. It just stops. Assets sit idle, distributions cannot be made, and bills or obligations tied to trust-held property may go unmet. Beneficiaries who rely on regular distributions suddenly find themselves with no income and no clear pathway to get things moving again.
2. An Enduring Power of Attorney Does Not Automatically Fix It
These surprises a lot of families. An enduring power of attorney lets someone manage another person’s personal and financial affairs. But acting as trustee involves fiduciary duties owed to beneficiaries, not just to the person who has lost capacity. In most Australian states, an attorney cannot simply step into the trustee role unless the trust deed explicitly allows for it. If your deed is silent on this point, your attorney may have no legal authority to act.
This is one of the most common gaps that experienced estate planning lawyers in Perth discover only after a crisis has already started.
3. The Trust Deed Has No Succession Mechanism
Many trust deeds drafted fifteen or twenty years ago simply did not contemplate what happens when a trustee becomes incapacitated. They may cover death, resignation, or removal, but not capacity loss. If there is no mechanism in the deed to appoint a replacement trustee in this circumstance, the family’s options narrow quickly and usually involve legal proceedings.
A deed review by wills and estate lawyers in Perth will identify these gaps before they cause damage.
4. The Appointor Role Is Overlooked
Most discretionary trusts have an appointor, the person with the power to remove and replace trustees. If the trustee and the appointor are the same person (which is common in family trusts), and that person loses capacity, there may be nobody left with the authority to appoint a new trustee. The whole structure can become legally paralysed, even if the family is in complete agreement about what should happen next.
- Check whether your trust deed separates the trustee and appointor roles.
- Confirm your appointor has a documented successor.
- Make sure the successor appointor is aware of their role and willing to act.
5. Court Intervention Becomes the Only Option
When a trust deed offers no clear path forward and the family cannot resolve things privately, the matter may need to go to the Supreme Court or a state tribunal for a new trustee to be appointed. This process takes months, costs thousands of dollars in legal fees, and plays out during a period when the family is already under enormous emotional strain. In some cases, the Public Trustee becomes involved, bringing an external institution into what is typically a very private family arrangement.
Nobody sets up a family trust hoping the Public Trustee will one day be running it. But without proper planning, that outcome is more possible than most people realise.
6. A Corporate Trustee Was Never Considered
One of the most practical ways to avoid all of these problems is to use a corporate trustee, which is a company set up specifically to hold the trustee role. Because the company is the trustee rather than an individual, the incapacity of a director does not disable the trust. Directors can be changed according to the company’s constitution without triggering the legal complications that arise when an individual trustee loses capacity.
The trust lawyers Perth clients work with regularly recommend reviewing whether a corporate trustee structure makes sense, particularly for families with substantial assets, multiple beneficiaries, or long-term estate planning goals.
7. Nobody Reviewed the Trust Deed When Circumstances Changed
This is perhaps the most avoidable problem on this list. Families change. The original trustee ages. Children grow up and become beneficiaries with their own families. Assets grow in value and complexity. Yet the trust deed often stays exactly as it was on the day it was signed. A deed that worked well for a young family in the 2000s may have real gaps when tested against the realities of an ageing trustee in the 2020s.
Regular reviews with an estate planning law firm ensure that your documents reflect your current situation, not who you were when you first signed them.
What to Do Now
If any of the seven points above gave you pause, that reaction is worth paying attention to. The time to fix a trust deed is not when a loved one is already in hospital. Here is a practical starting point:
- Pull out your trust deed and check whether it addresses trustee incapacity.
- Confirm your enduring power of attorney documents are current and understood by the attorney.
- Check whether the appointor role is clearly defined with a documented successor.
- Consider whether a corporate trustee structure would suit your family’s needs.
- Book a review with estate planning lawyers near me who understand how trusts, wills, and powers of attorney interact.
Getting this right is not complicated when you do it early. It becomes very complicated when you wait until the question is no longer hypothetical.
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