For many Australian farming families and family-run enterprises, their most valuable assets (land, livestock, plant, investment properties, share portfolios and commercial premises) aren’t held in the Willmaker’s personal name. Instead, they’re held in discretionary trusts, structures used to protect assets, manage tax, and keep wealth in the family across generations.
When it comes time to write a Will, many business owners assume they can divide trust assets amongst their children. However, since those assets are not personally owned by the Will maker, their Will has no legal power to deal with them.
This is one of the most common and costly misunderstandings among Willmakers who draft Wills without proper legal advice, especially those using will kits or online platforms.
The legal position: you can’t gift what you don’t own
It’s a fundamental rule of estate law: your Will can only distribute property that you personally own at the time of your death. This principle is clearly expressed in the Succession Act 2006 (NSW), which states in section 4(1): A person may dispose by Will of property to which the person is entitled at the time of the person’s death. The Act goes further and expressly states in section 4(5): A person may not dispose by Will of property of which the person is trustee at the time of the person’s death.
Although legislation in other States and Territories may not be quite so explicit, the same principle applies: if the asset sits in a trust, it’s not yours to gift in your Will.
Case example: Public Trustee v Smith [2008] NSWSC 397
This principle was tested in Public Trustee v Smith, where the deceased had significant control over a family trust: she was a beneficiary of the trust, the sole director and shareholder of the trustee company and held the role of appointor (a very important role, being the person who has the power to dismiss or appoint the trustee of the trust).
Despite her control, the Court found that she did not personally own the property of the trust. Therefore, her attempt to gift trust assets in her Will failed. The case confirms that even full control over a trust’s structure does not entitle a person to dispose of its assets by Will.
What you can and cannot do in your Will
There are strategies you can adopt in your Will to ‘deal’ with trust assets:
You can facilitate the succession of control
In many trust deeds, the Willmaker, often acting as the appointor or guardian of the Trust, has the power to nominate a successor who will control the trust after their death. So, while a Willmaker cannot dispose of trust assets directly via their Will, they can often facilitate the succession of control by naming who will step into key roles such as appointor, guardian, trustee, or director of the corporate trustee. This ensures that decision-making power over the trust passes to the next generation, a trusted person or entity, preserving the Willmaker’s intentions about who should benefit from the trust in the future.
By planning for control, not ownership, the Willmaker can influence how and to whom trust assets are distributed over time, without breaching the legal boundaries that separate trust property from personal estate.
We can help you to put in place a comprehensive trust succession plan, read more here or contact us to learn more.
You cannot direct the trustee to make specific distributions
While a Willmaker may wish to specify which beneficiaries of a discretionary trust should receive certain assets or entitlements after their death, they generally cannot fetter the discretion of the trustee. The fundamental nature of a discretionary trust is that the trustee retains wide powers to decide how, when, and to whom distributions are made, within the scope of the trust deed.
This means, any attempt in a Will to direct the trustee to make specific distributions may not be legally binding and may be disregarded by the trustee as an impermissible attempt to override their discretion. Instead, the Willmaker should focus on succession of control, such as appointing a trusted person as the next appointor and/or trustee, rather than trying to impose fixed directions that conflict with the trust’s discretionary framework.
We note there are strategies that may allow the discretion of a trustee to be fettered but these must be implemented very carefully, both to ensure they are effective and do not trigger adverse tax consequences.
You can gift unpaid present entitlements and loans
While a Willmaker cannot gift assets held in a discretionary trust, they may be able to gift unpaid present entitlements (UPEs) and loan accounts owed to them by the trust. These are personal assets, amounts the trust legally owes to the Willmaker as a result of prior distributions or loans and therefore form part of their estate.
UPEs arise when the trust has resolved to distribute income or capital to the Willmaker, but the amount has not yet been physically paid. Loan accounts, similarly, represent funds the Willmaker has advanced to the trust and which remain repayable, because both are debts owed to the Willmaker in their personal capacity, they can be specifically gifted in the Will to chosen beneficiaries, providing a practical and legally effective way to extract value from the trust structure without interfering with trust ownership or the trustee’s discretion.
How we can help
At ADLV Law, we understand the complexities that arise when key family assets, such as farms, businesses, or investments are held in discretionary trusts. We help clients navigate the limits of what a Will can do and work with them to develop integrated succession strategies that go beyond simple asset gifting.
Our team will review your trust deed, company structures, and estate plan to ensure there is a clear and legally effective pathway for the succession of control. We also assist in balancing the needs of beneficiaries, particularly where some children are involved in the business and others are not by using tools such as life insurance, loan forgiveness, and equalisation clauses.
Whether you’re seeking to preserve the family enterprise, avoid future disputes, or ensure your intentions are carried out, ADLV Law provides practical, tailored advice that brings clarity and control to your succession planning. Call us on 1300 654 590 or email us to discuss your estate planning needs.
The information contained in this post is current at the date of editing – 04 July 2025.
