“Now, we can do some but not all of those things. I’ve had situations where we’ve made kids directors of the trustee company but not shareholders or given them appointor roles so that the parents are keeping control of the trust, but involving the kids in decisions.”

Hay-Bartlem explained that the first line of control of a family discretionary trust is the trustee, either the individuals or the company.

“If it’s a company, the directors are the ones who make the day-to-day decisions about the trust giving out income, giving out capital investments,“ Hay-Bartlem said.

“If you’ve got a company, there’s also the question of the shareholders, because the shareholders of that company will appoint and remove directors. The second line then is the appointor role, sometimes called principal, sometimes called guardian. They decide who the trustee is, and so can appoint and remove the trustee and therefore have control over the trust.”

He continued that the decision on whether to bring children into a discretionary trust depends on a number of considerations.

“We often do this for families where we’ve got a family business and the parents want to involve the children, some or all of them, in the control of that family business,” Hay-Bartlem said.

“We might do it where we want to make sure that control of that trust will pass down to that child or those children when something happens to the parent, and that can be a very effective mechanism.”

However, he warned that it must be remembered that when bringing children into the trust, they also become decision-makers.

“Therefore, you have to look at whether they may be able to outvote you and whether you want them involved in all kinds of decisions about a trust. Also, if it’s a business, will there be a liability issue?” he said.

“One that’s coming up more and more, unfortunately, [is] if your child gets involved in a matrimonial dispute, do the trust assets get dragged into that dispute because they are a director or shareholder of the trustee or an appointor?”