Is Your Trust a Tax Tool or a Fortress? Why a Family Protection Trust is crucial for ALL clients!
- Grant Abbott
- Apr 1
- 3 min read
Dont forget to book for the Fiji SAPEPAA conference on 17 October 2025- back to where it all started. A case study and interview practice extravaganza to take your SAPEPAA advising to the next level - with 14 SAPEPAA CPD points. For more information and register for your early bird: https://www.sapepaa.org.au/event-details/sapepaa-international-advisers-conference-fiji-2025
Q & A with SAPEPAA
Can you please explain in simple terms why there’s a benefit of upgrading a trust running a business, to a family protection trust.
Absolutely! Here are six benefits of upgrading a business trust to a Family Protection Trust:
Shields Business Assets from Legal Threats
A Family Protection Trust is designed to defend against lawsuits, bankruptcy, and family provision claims. Unlike standard business trusts set up mainly for tax, these are built to protect assets from creditors and legal challenges.
Ensures Bloodline Inheritance
Family Protection Trusts are structured to keep wealth within the family bloodline, avoiding unintended distribution to ex-spouses or outsiders through divorce, remarriage, or disputes.
Built-in Succession Planning
These trusts include clear rules for succession, so if something happens to the business owner, control passes smoothly to the next in line—reducing the risk of leadership voids or costly legal wrangling.
Prevents Frozen or Disrupted Businesses
If the current business trust lacks a solid succession structure, the business may be left in limbo upon the owner’s death. A Family Protection Trust avoids this, keeping operations running and value intact.
Modernised Legal Structure
Many old trusts are outdated or silent on critical issues like appointor succession or asset protection. Upgrading to a Family Protection Trust is like moving from a Nokia to a smartphone—it’s the same shell but now purpose-built for your legacy.
Tailored for Multi-Generational Wealth
These trusts are designed with the long game in mind—supporting not just your children, but also grandchildren and beyond, with controls in place to manage, protect, and grow wealth across generations.
Case Study: Two Families, Two Outcomes
❌ The Johnsons – A $1.8 Million Loss and a Family Torn Apart
The Johnson Family Trust was set up in 2005 by their accountant—a standard discretionary trust, no succession planning, no asset protection, no appointor chain.
When Peter Johnson died unexpectedly in 2022:
No successor appointor was named.
His wife, Linda, assumed she would control the trust — but Peter's children from his first marriage disputed this.
The trust assets included their family business (valued at $2.3 million), plus $800,000 in retained earnings and property.
After three years of litigation, the result:
$420,000 in legal fees (across five beneficiaries).
The business was sold below market value in a fire sale during proceedings.
Family relationships were irreparably damaged.
Net loss of $1.8 million in asset value, plus future income streams gone.
Why? The trust was built for tax savings, not protection or succession.
✅ The Chens – Seamless Transition, Zero Conflict
In contrast, the Chen Family upgraded their business trust to a Family Protection Trust (FPT) in 2021.
The FPT included a Family Protection Appointor Chain going three generations deep.
It embedded bloodline beneficiary clauses, and the trustee company had backup directors named in the constitution.
When founder Michelle Chen passed away in 2023, her eldest daughter immediately took over as Family Protection Appointor.
The result:
The business (worth $4.1 million) never stopped trading.
No family disputes.
Zero in legal fees.
The trust continued to distribute dividends and salaries to family members, preserving both wealth and relationships.
If you have any form of discretionary trust protect your family wealth with a Family Protection Trust from your SAPEPAA Adviser - see the listing on www.sapepaa.org.au
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