Can You Leave Family Trust Assets Equally Between Your Children?

The assets of your trusts are not yours to leave under your Will.  You can pass control of trust by giving control of the significant positions of authority in the trust to another person or persons.

Subject to the particular trust deed, the important positions of authority in family trusts are usually the trustee (who runs the trust and distributes income and capital), the Appointor (who has the power to hire and fire the trustee), and the Guardian (whose consent is usually required to distribute the capital of the trust and amend the trust deed).

I find that estate planning lawyers often fail to bring to the attention of the clients the matters required to achieve equality between second-generation siblings in trusts.

Recently, a client who had sold his farm asked me to check to see if his estate plan was in order.  I noted that my client appointed his three adult children as Guardians and Appointors of his family trust and left his shares in the trustee company between them equally.

When I explained to my client that this did not guarantee equality between his three children he was surprised, as he assumed that was the case.  He said the lawyer who prepared the estate plan did not explain that to him.  There was certainly the potential for litigation between my client’s three children, as one of the three children worked on the farm and felt he should receive more from the trust than his siblings.

Appointing your three children as Guardians and Appointors of your trust and equal shareholders in the trustee company does not guarantee equality because two of your children could “gang up” on the third and control the trustee for their benefit unless steps are taken to achieve equal control of the trust between the children.

Equality could be achieved between the children by amending the constitution of the trustee, putting in place a shareholder’s agreement, and/or amending the trust deed as is appropriate in the particular situation.

What should you do?

You should have a qualified lawyer put in place the appropriate documentation to ensure equality between second-generation siblings in your trust.

We can assist if you require advice in respect of trust, succession, or estate planning law.