Safeguarding Family Wealth: The Power of Trusts for Capital Preservation

Michelle Bromley CFP®, Director & Private Client Adviser – Strategy and Advice

Preserving and protecting family wealth across generations is a paramount objective for high-net-worth individuals. To achieve this, astute investors often rely on trusts as a key component of their wealth preservation strategies. Trusts offer a range of benefits, including asset protection, efficient estate planning, and tax advantages. In this article, we delve into the role of trusts in preserving capital and securing the financial legacy of affluent families.

The Power of Trusts:

Trusts have long been recognised as potent vehicles for wealth preservation. By establishing a trust, individuals can transfer assets to a separate tax entity managed by a trustee, who administers the assets for the benefit of designated beneficiaries. Let’s explore the key advantages of using trusts for capital preservation.

Asset Protection:

One of the primary advantages of trusts is their ability to safeguard family wealth. Assets held within a trust are typically shielded from potential risks and liabilities as beneficiaries generally don’t have an ownership interest in trust income or capital until a distribution is declared. A well-structured trust can provide a protective barrier that can safeguard assets from creditors, lawsuits, divorce settlements, and other claims. This ensures the preservation of capital for future generations, maintaining the family’s financial security.

Tax Efficiency:

Tax efficiency is a crucial aspect of wealth preservation. Discretionary trusts allow distribution of taxable income, including pass through of franking credits and discount capital gains, among family members to leverage the lower marginal tax rates of non-earning individuals. The overall tax rate paid by trust beneficiaries can be capped at the company tax rate of 30% by streaming income not required to fund living needs to a corporate beneficiary, or by using investment bonds which are internally taxed at 30% and offer tax-free withdrawals after 10 years if certain conditions are met.

Specialised Asset Management:

Trusts enable specialised asset management strategies tailored to the unique needs of wealthy families. The trustee can engage the expertise of professionals skilled in finance and investments to assist in managing the assets within the trust. These trustees can provide personalised investment strategies that align with the family’s objectives, risk tolerance, and long-term goals.

Inter-Generational Wealth Transfer:

Trusts possess the invaluable strength of intergenerational wealth transfer, with a term that can span up to 80 years. This longevity makes trusts an invaluable tool for managing family wealth across multiple generations, ensuring the sustained preservation and growth of assets over an extended period. Trust property does not form part of an estate on death, minimising the risks and complexities associated with Will disputes. Assets that do flow into your estate can be transferred into a Trust created by your Will, known as a Testamentary Trust.

Controlling the Legacy:

By establishing a trust, individuals can retain control over their assets even while passing on ownership to future generations. Trusts allow for the appointment of successor trustees who will manage and distribute the assets according to the creator’s wishes. This ensures that the family’s values, principles, and legacy are preserved and passed down through generations. Moreover, trusts can incorporate provisions to protect assets from mismanagement, reckless spending, or external influences, ensuring that the capital remains intact for the intended beneficiaries.


Trusts serve as indispensable tools in preserving and securing wealth for high-net-worth families. With their asset protection capabilities, efficient estate planning advantages, tax efficiencies, and opportunity for inter-generational asset management, trusts offer a comprehensive framework for capital preservation. By harnessing the power of trusts, families can fortify their financial security, ensure a seamless transfer of wealth, and create a lasting legacy for future generations.

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