Financial planners will be familiar with the following situation. A long-standing client dies, the funds are paid out to three children, and within a year the money has moved to the children’s own banks and advisers. The relationship you spent twenty years building ends with the estate. With the largest intergenerational wealth transfer in history under way, this represents a significant business risk for advice practices.
Assets under trust last longer than assets under management
When wealth passes into a well-designed trust, such as a testamentary trust, a family trust or a legacy trust for grandchildren, it does not get split and scattered. The trustee holds the capital under a trust deed, for the family, often for a lifetime or longer. A trustee typically appoints an investment adviser under a written investment mandate, setting objectives, risk limits and reporting.
For the family, that means the purpose of the wealth is protected: education, housing, support for a vulnerable member, the family’s legacy. For the adviser who helped design it, it means a continuing mandate that the trustee reviews on merit, rather than a relationship that ends on the client’s death.
Your objectives, in your language
- Retention across generations. Bring the children into the conversation while the parents are alive, around a structure that is designed to last.
- A clear mandate. A trustee needs a documented investment policy and strategy. You are the natural person to propose one.
- Best interests. The structure must serve the family first. Trusts drafted with independent legal advice protect you as well as the client.
- Scale. One well-structured family can mean several trusts, several generations and a long relationship.
Where we fit
- We advise the family and draft the wills, testamentary trusts and family trust deeds, including how investment powers and advisers are appointed.
- We can act as professional trustee or co-trustee where a family wants an independent hand. We do not manage investments, so the investment mandate stays with an adviser.
- We explain the structure to the family, in English, Mandarin or Cantonese, including to elderly parents and children overseas.
How we like to work with advice practices
We usually start with a conversation with a practice’s principals, so they can judge our approach. Then we meet the advisers who look after the clients day to day. A short joint session on estate planning for Chinese families, or a joint review of one client’s structure, is a good way to start.
Frequently asked questions
How does a testamentary trust keep family wealth together?
A testamentary trust is a trust created by a will that takes effect on death. Instead of the estate being split and paid out to each beneficiary, the trustee holds the capital under the trust deed for the family, often for a lifetime or longer. That protects the purpose of the wealth, such as education, housing or support for a vulnerable family member.
Can a trustee appoint a financial adviser to invest trust funds?
Yes. A trustee typically appoints an investment adviser under a written investment mandate that sets objectives, risk limits and reporting. The trustee needs a documented investment policy and strategy, and reviews the adviser’s mandate on merit over time, which gives the family oversight and the adviser a clear role.
Can a law firm act as a professional trustee of a family trust?
Yes, where a family wants an independent hand. Chua Tan Associates can act as professional trustee or co-trustee of a testamentary or family trust. The firm does not manage investments, so the investment mandate stays with a financial adviser, and the firm can explain the structure to the family in English, Mandarin or Cantonese.
How can financial planners keep client relationships across generations?
By bringing the children into the conversation while the parents are alive, around a structure designed to last, such as a testamentary trust or family trust. When wealth is held in trust rather than paid out, the adviser can continue under a mandate reviewed by the trustee, rather than the relationship ending with the client’s death.
Chua Tan Associates advises families, executors, trustees and their professional advisers on estate planning, estate administration and estate disputes, in Australia and across borders. To arrange a confidential consultation, please contact our Melbourne office on +61 3 9602 3988 or submit an enquiry. Advice is available in English, Mandarin and Cantonese.
Justin Chua (蔡智勋), lawyer and mediator, Chua Tan Associates, Melbourne. General information only, not legal advice. Victorian law unless stated otherwise.
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