Why Standard Wills Are No Longer Recommended? 

For decades, the traditional “everything to spouse, then to children” was seen as the simplest and safest way to pass on assets. But in today’s complex legal and financial environment, standard wills have become outdated. Known among estate-planning professionals as “destructive wills,” these simple documents often expose families to lawsuits, creditors, divorces, and tax traps. 

At the same time, discretionary trusts—once considered a useful structure—have proven inadequate for long-term family-wealth protection. They score barely 1 out of 10 for true asset protection. While they offer short-term tax advantages, they fail to safeguard assets over generations. 

It’s time to rethink how wealth is passed on and to understand why modern families are upgrading from standard wills and discretionary trusts to Family Protection Trusts (FPTs). 

The Hidden Risks of Standard Wills and Discretionary Trusts 

A standard will distribute assets directly to individuals — a spouse, children, or other beneficiaries. On paper, it seems straightforward. But in reality, this simplicity creates major vulnerabilities. 

Once assets are distributed, they legally belong to the recipients and become exposed to: 

• Family-law claims (divorce or de facto relationships) 

• Bankruptcy or creditor attacks 

• Poor succession planning and disputes between family members 

Discretionary trusts, while more flexible, are typically designed for tax purposes, not protection. Their structure often allows outsiders — including ex-spouses or creditors — to access assets through the beneficiaries. 

Real World Cases That Changed How Families Plan Their Estates 

The following real-life examples illustrate how traditional approaches to estate planning can leave families exposed — and how properly structured Family Protection Trusts (FPTs) can make all the difference. 

Case 1 – The Gift Gone Wrong 

A well-intentioned grandmother gifted her granddaughter a $1.9 million apartment outright. Unfortunately, when the granddaughter later ended her relationship, her former partner successfully claimed $900,000 under family-law proceedings. 

Advice:
Directly gifting assets may seem generous but can unintentionally expose them to third-party claims. Had the property been held within a Family Protection Trust, it would have been preserved exclusively for bloodline beneficiaries and shielded from external disputes. 

Case 2 – The Testamentary Gap 

A mother bequeathed $8 million worth of apartments directly to her daughter through a standard will, without incorporating a testamentary trust. As a result, those assets are now vulnerable to both family-law and family-provision claims. 

Advice: 
Every will should include a testamentary trust clause. Testamentary trusts not only protect inherited assets from relationship breakdowns and creditor actions but also provide tax-efficient income distributions, particularly beneficial for minor beneficiaries. 

Case 3 – The Inheritance Lost 

Sophie inherited a $1.5 million home in Melbourne. After her subsequent separation, the family court deemed the inheritance part of the matrimonial asset pool, resulting in her losing a significant portion of it to her ex-partner. 

Advice: 
An unprotected inheritance is legally treated as divisible property in the event of a divorce or separation. Holding inherited assets within a Family Protection Trust ensures they remain outside the reach of such proceedings, preserving wealth for intended heirs. 

Case 4 – Bloodline Protection Success 

In contrast, the Lawson family structured their estate through a Family Protection Trust with beneficiaries limited to direct descendants. When their son went through a divorce, the court confirmed that trust-held assets were excluded from the marital property settlement. 

Advice: 
This outcome demonstrates the strength and resilience of a well-drafted FPT. By clearly defining beneficiaries and maintaining the trust’s integrity, families can achieve genuine multigenerational protection from legal disputes and external financial risks. 

These cases highlight a clear truth: traditional wills and direct inheritances no longer provide adequate protection in today’s legal and financial landscape. Proactive estate planning using structures like Family Protection Trusts ensures your legacy remains secure, controlled, and preserved for future generations. 

Why Family Protection Trusts (FPTs) Are the Modern Solution 

A Family Protection Trust (FPT) is purpose-built for long-term asset protection and estate continuity. It limits benefits strictly to the bloodline, ensuring that only children, grandchildren, and future descendants can benefit. 

FPTs can include sub-funds for each family branch allowing children to manage their own share independently without creating new tax file numbers. This structure helps prevent family conflict and keeps control centralized. 

The Right Structure and Jurisdiction Matter 

To maximise protection: 

• Always use a corporate trustee (a company acts as trustee). 

• Clearly state the jurisdiction in the deed. If left unstated, courts may decide, potentially triggering capital gains tax (CGT) or stamp duty when the trust vests. 

This trust structure separates legal ownership (held by the trustee) from beneficial enjoyment (held by the beneficiaries) — forming the legal foundation of asset protection. 

Moving Assets Safely: The Gift & Loan-Back Strategy 

One powerful tool for transitioning personal assets into a Family Protection Trust is the Gift & Loan-Back (Protector) Strategy. 

Here’s how it works: 

1. You gift cash or property to the FPT. 

2. The FPT loans the same amount back to you, secured by a mortgage or PPSR. 

3. You maintain a proper loan agreement, interest resolutions, and repayment schedule. 

4. Upon your death, the executor repays the loan — ensuring assets flow into the trust, not your estate. 

This structure keeps your wealth protected from family-law claims, creditors, and potential future wealth-transfer taxes. Done properly, it’s fully compliant with ATO guidelines, does not trigger CGT or stamp duty, and ensures the trust — not individuals — holds long-term control. 

Preparing for Future Tax and Policy Changes 

Division 296, effectively a “wealth tax” applying 15% to super balances over $3 million is proposed in Australia. Many experts forecast that inheritance and gift taxes—similar to the UK model—could be introduced within the next decade. 

Families who act early by transferring wealth into FPTs can legally safeguard assets before such taxes arrive. Key tax insights include: 

• Division 118-B: CGT exemption on death for a main residence 

• TD 2019-14: Validates sub-trust splitting for improved tax management 
   
   

Smart Governance and Succession Planning 

Every FPT should define a clear line of succession for control: 

• Appointors (controllers) become Family Protection Appointors 

• Successor appointors are typically children, then grandchildren 

• Guardians can be appointed to oversee trustee decisions based on ethical guidelines 

This ensures continuity, accountability, and alignment with family values even generations later. 

Upgrade Before It’s Too Late 

In today’s legal and financial environment, a standard will is not recommended as it exposes families to unnecessary risk, litigation, and tax inefficiencies. 

To protect your legacy: 

• Replace discretionary trusts with Family Protection Trusts (FPTs) 

• Always include testamentary trust clauses in wills 

• Implement Gift & Loan-Back strategies to move assets off personal balance sheets 

• Ensure clear governance and succession planning 

By taking these steps now, you’ll build a structure that preserves wealth across generations — ensuring your hard-earned assets remain where they belong: within your family.