It keeps assets safe for the kids and the grandkids, no matter what life throws at them. Think of it as setting up the family for success long after you’ve passed the baton.
Here’s the straight-up version from your friendly neighbourhood accountant who has seen a few family explosions in his time.
A bloodline trust is a trust structure designed so that your wealth stays within your direct family line. Think “kids, grandkids, great-grandkids” rather than “your daughter’s ex-husband who suddenly remembers he’s spiritual and entitled to half the house.”
It’s essentially a family trust with tighter guardrails. The rules around who can benefit from the trust are restricted to your lineage. No spouses, no partners, no random in-laws who appeared out of nowhere at Christmas.
A bloodline trust keeps your wealth in the family tree, not the branches that fall off and blow away in a stiff breeze.
1. Protection from divorce
If your child divorces, assets sitting in a bloodline trust generally aren’t considered part of the marital pool. Which means you’re protecting the assets you spent a lifetime building from funding someone else’s sea-change.
2. Protection from bankruptcy
Similar to other trusts, if a beneficiary goes through financial trouble, the trust can help insulate family assets from creditors. Not fun to imagine, but good to plan for.
3. Control across generations
You can set the ground rules long after you’ve left the building by writing the rules into the trust deed. It lets you outline how and when wealth passes on, which reduces the chance of a family blow-up later.
4. Tax planning flexibility
Like any trust, you’ve got room to distribute income in a tax-smart way each year. But only to bloodline.
5. Asset longevity
Because wealth isn’t leaking sideways into spouses or partners, more of it stays intact for the next generation. Think the Royal Family.
1. Less flexibility
Although a bloodline trust has more flexibility than not having a trust, it has less flexibility than say a normal family trust. This is because the beneficiaries are restricted to the bloodline, which means you can’t utilise the in laws for tax planning.
2. Administration and cost
They’re more complex than a standard family trust. More rules to manage, more legal input and ongoing compliance costs.
3. Potential family tension
Telling your future son-in-law, “Sorry mate, you’re not part of the trust” is a fun little grenade.
4. They don’t fix bad planning
A bloodline trust is a tool, not a miracle. If the will, the trustee behaviour or the broader strategy is messy, the trust won’t save the day. A bloodline trust is a good tool for amongst a broader strategy.
1. Families with significant assets
Property portfolios. Businesses. Legacy wealth. Stuff worth protecting from divorce, drama or a poor life choice made at age 23.
2. Blended families
These structures help make sure wealth flows exactly where you want it.
3. Intergenerational wealth plans
If you want your estate to look after grandkids and beyond, not just the next generation, this gives you the structure to do it.
If your asset pool is modest, your family structure is simple or everyone gets along like a wholesome ABC primetime show, a standard family trust or a well-structured will might cover everything you need.
No point buying a Rolls Royce when a Corolla will get you to Coles just fine.
A bloodline trust is a powerful tool when it’s used in the right situation. It protects your legacy, keeps assets in the family and gives you control long after you’re around to supervise the BBQ.
But like any structure, it comes with costs, rules and a bit of paperwork no one wants to think about on a Sunday.
If you want help figuring out whether a bloodline trust makes sense for your family, your estate or your business, have a chat with our estate planning team. We are an accredited SAPEPAA advisor who love protecting wealth.
– The team at PAL (making accounting slightly less boring since way back when)
Disclaimer: This article is here to give you general info only, not professional advice specific to your unique situation. While efforts are made to ensure accuracy, the content may change over time. We can’t take responsibility for any decisions based on the contents of this article, so be sure to chat with your accountant or advisor first!
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