When older family trusts no longer do what they were set up to do

A pattern I see regularly involves family trusts that were set up ten or more years ago, often just before a property purchase.

At the time, the trust was created quickly, usually for a specific reason — asset protection, relationship property concerns, or advice that “this is what people do before buying property”. The trust deed was signed, the property was transferred, and life moved on.

What often didn’t happen was the follow-up work needed to make the trust operate properly over time.

How these trusts were commonly established

Many of these trusts share similar features:

they were set up shortly before purchasing a home or investment property
the person assisting was not a trust specialist
the focus was on the immediate transaction, not the longer-term structure
once the property purchase settled, the trust received little further attention

At the point of establishment, the trust may have looked sound. The problem is that a trust is not a one-off transaction. It is a framework that only works if the surrounding documents and decisions support it.

Where things start to unravel

Over time, gaps begin to appear.

Common examples include:

Gifting programmes that were never started, never completed, or stopped without understanding the consequences
Wills that were never updated to align with the trust structure
Memoranda of wishes that no longer reflect family circumstances, or never existed at all
Trust powers (such as appointment and removal of trustees) sitting with people who have died, lost capacity, or were never the right choice in the first place
Succession planning that assumes the trust will “just continue”, without considering who will actually be able to act

Individually, these issues may not seem critical. Taken together, they can undermine the very protection the trust was meant to provide.

Why the original intent often falls away

In many cases, the trust was set up to manage a risk that existed at a particular point in time. A relationship may have been new. A business venture may have been underway. Personal circumstances may have been uncertain.

Ten or fifteen years later, the risk profile is often completely different, but the trust structure has not adapted with it.

The result is a trust that still exists on paper, but no longer reflects:

how assets are actually owned and controlled
how decisions are meant to be made
what outcome the settlor would want if something went wrong

In some situations, the trust can create more difficulty than protection — particularly when it comes to succession, incapacity, or death.

The consequences tend to surface late

These problems rarely announce themselves early.

They tend to appear when:

a trustee dies or loses capacity
a property needs to be sold or refinanced (and questions are being asked for AML purposes)
relationship property or creditor protection issues arise
residential care planning becomes relevant
beneficiaries ask questions that trustees cannot easily answer

At that point, trustees often discover that the trust is technically valid, but practically awkward, slow to operate, or seriously exposed to challenge.

Why this matters more now

Changes in trust law, increased reporting obligations, and greater scrutiny from banks, investment houses, and government agencies have made these issues harder to ignore.

A trust that is no longer fit for purpose is far more difficult to administer in today’s environment than it was a decade ago. What may once have been tolerated as informal or incomplete now attracts questions and potential personal financial liability.

Reviewing does not always mean fixing everything

A trust review is not always about preserving the structure at all costs.

In some cases, the right outcome may be:

gifting assets that are still in the name of the person who settled the trust
updating appointment powers and succession planning
completing or correcting historical gifting
aligning wills and EPAs with the trust
or deciding that the trust has outlived its usefulness and should be wound up

The key issue is not whether the trust continues to exist, but whether it still fit for the purpose it was set up to deal with (or the ones that are now relevant).

A practical way forward

For people with older trusts, the most useful starting point is often a structured review that looks at:

why the trust was originally set up
how it has actually been operated
whether the surrounding documents support it in the way needed
and whether it still serves a meaningful purpose today

That exercise tends to reveal fairly quickly whether the trust can be brought back into alignment, or whether a different approach would now be more effective.

If you are dealing with a trust that was set up years ago around a property purchase and has not been revisited since, it may be worth having that conversation sooner rather than later.

It is usually far easier to address these issues while options are still open.

Posted 14 days ago