Yet, many Australians overlook just how complex intergenerational wealth transfer can be. Without a well-planned structure, wealth can be eroded by tax inefficiencies, tangled in legal disputes, or mishandled by unprepared beneficiaries. The difference between a smooth transition and a financial headache often comes down to choosing the right vehicle.
Trusts and investment companies offer two of the most effective ways to manage, protect, and transfer wealth, but they serve different purposes. This article breaks down when and why to use each, helping you make an informed choice that secures your family’s financial future.
Trusts: The Flexible Wealth Transfer Tool
Trusts have long been used in Australia as a strategic tool for managing and protecting family assets. They can provide advantages regarding intergenerational wealth transfer, taxation, and legal protection.
Key Benefits of Trusts:
✔ Protecting Wealth from Legal Risks
Assets held within a family trust or testamentary trust are legally separate from individual beneficiaries, offering protection from creditors, legal disputes, and divorce settlements.
✔ Tax Efficiency
A discretionary trust allows income and capital gains to be distributed to beneficiaries in a tax-effective manner, potentially reducing overall tax liabilities. Testamentary trusts, which are created through a will, provide additional tax advantages for minor beneficiaries, allowing them to receive distributions at lower tax rates.
✔ Controlled Wealth Distribution
Trusts can include rules for when and how beneficiaries receive their inheritance, ensuring responsible wealth management for future generations. This is particularly useful in cases where heirs may not be financially experienced or where an estate owner wants to avoid sudden wealth mismanagement.
✔ Estate Planning Advantages
Unlike assets passed through a will, which can be contested in court, a properly structured trust bypasses probate and ensures a smoother transition of assets to beneficiaries.
When Should You Consider a Trust?
Trusts can be a valuable tool for families looking to manage wealth distribution flexibly, protect assets from potential risks like legal disputes or divorce, and structure inheritance in a tax-efficient way. However, the right approach depends on your specific circumstances. Working with a financial planner ensures your estate plan aligns with your long-term goals while considering tax implications, family dynamics, and asset protection strategies.
Investment Companies: A Long-Term Asset Management Strategy
For high-net-worth individuals and business owners, a family investment company (FIC) can be a powerful tool for structuring long-term wealth management. Instead of relying on a trust to hold assets, an investment company allows a family to manage wealth through a corporate structure, benefiting from corporate tax rates and governance control.
Key Benefits of Investment Companies:
✔ Tax Advantages
Unlike individuals who pay marginal tax rates, investment companies are taxed at the corporate rate (currently 30% or 25% for base rate entities in Australia), which can be significantly lower than personal tax rates on high incomes.
✔ Centralised Asset Management
A family investment company allows multiple family members to hold shares in the company, ensuring structured decision-making and long-term wealth governance.
✔ Stronger Control Over Wealth Growth
Where trusts distribute income and capital gains, an investment company retains profits, allowing for reinvestment and continued asset growth within the company.
✔ Succession Planning & Shareholder Flexibility
Unlike a trust, which automatically distributes wealth based on the trust deed, an investment company allows family members to own shares, pass them on, or structure buyout options to suit long-term succession plans.
Which One is Right for You? Trusts vs Investment Companies
Both trusts and investment companies offer powerful advantages, but they serve different financial goals. The right choice depends on your family’s specific circumstances, estate size, and tax planning needs.
Key Factors to Consider:
- Estate Complexity – Large estates with multiple heirs may benefit from a combination of both structures.
- Taxation Strategy – Trusts allow for tax-effective distributions, while investment companies provide stable, corporate tax rates.
- Control & Succession – Companies offer a structured governance model, while trusts provide flexibility in inheritance planning.
- Legal & Asset Protection – Trusts can shield assets from external risks, whereas investment companies provide structured ownership.
Case Study: A High-Net-Worth Family’s Wealth Strategy
A successful Australian business owner wanted to secure their family’s financial future while ensuring tax efficiency. With Moiler Wealth as their advisor, we recommended:
- A Family Trust – To distribute rental income from multiple investment properties tax-efficiently across family members.
- An Investment Company – To hold shares in multiple businesses, retaining profits for reinvestment at corporate tax rates.
- A Testamentary Trust – To ensure minor beneficiaries receive wealth under tax-efficient structures with legal protection.
By combining these financial structures, the family was able to protect their assets, reduce their tax burden, and ensure long-term financial security for generations.
Final Steps to Structuring Your Wealth for the Future
Whether you choose a trust, an investment company, or a combination of both, the right structure ensures your wealth is protected and transferred efficiently to future generations. Making the wrong choice can lead to unnecessary tax liabilities, legal complications, or even wealth erosion over time.
Contact us today to develop a tailored intergenerational wealth plan that ensures financial security for future generations.
Moiler Wealth assists high-net-worth individuals and family groups, professionals, business owners, and pre-retirees to live life your way.
Learn more about Moiler Wealth here.
Disclaimer: The advice provided here is general in nature only as, in preparing it we did not take account of your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should consider the relevant Product Disclosure Statement before making any decision relating to a financial product.
Ian Moiler Pty Ltd (Moiler Wealth) is an authorised representative of Count Financial Limited ABN 19 001 974 625 holder of Australian financial services licence number 227232 (“Count”). Count is owned by Count Limited ABN 111 26 990 832 of GPO Box 1453, Sydney NSW 2001. Count Limited is listed on the Australian Stock Exchange.
