Jacqueline Barton

Ways to prevent family trust disputes

· ·

Most families don’t expect disputes to arise within their trust, especially when its purpose is to protect wealth and support loved ones. But misunderstandings about control, rights or responsibilities can quickly create friction.

A little upfront planning can help preserve relationships as well as assets.

When roles, expectations and powers are unclear, disputes can arise and often at the worst possible time, such as after the death of a family member.

Why governance matters

A trust deed sets out the legal framework, but it does not address family expectations, values or the “rules of engagement” around control, communication and decision-making. That’s where a trust charter or family constitution can be invaluable.

A trust charter is a non-binding but strategically important document that outlines:

  • the family’s vision and values
  • agreed principles for managing wealth
  • expectations of trustees, appointors and beneficiaries
  • communication protocols
  • dispute resolution processes.

For more complex families, such as those with multiple branches, blended structures or significant operating businesses, these documents can prevent misunderstandings and provide clarity across multiple generations.

For example, disputes often arise because beneficiaries don’t understand the limits of their rights or the powers of trustees. Also, families often avoid talking about who will control the trust next.

In the longer term, a charter provides continuity as family members age, or retire, by providing younger family members with guidance about their responsibilities.

Trustee succession planning

A number of recent court cases have shown how the absence of agreed rules and communication channels can increase conflict, particularly when it comes to succession.

A trust’s long-term stability depends heavily on what happens when the original trustee, appointor or guardian dies, becomes incapacitated, or steps aside. Many families assume the deed will automatically produce a smooth transition. Often, it doesn’t.

The Cardaci dispute, an eight-year legal battle ending with a High Court decision in 2024, shows how messy trust control can become without forward planning. The case involved family members disputing the administration, decision-making powers and trustee conduct in a long running family business. The litigation demonstrates how disputes about control and succession can escalate unless families regularly review their trust structures and governance frameworks.i

Preventing disputes

Don’t be tempted to “set and forget” a trust. Keeping on top of new needs and expectations as well as changing family structures may save time and money later on.

1. Review the trust deed regularly

Trusts established decades ago often contain outdated provisions and restrictive definitions of beneficiaries. Major life events, such as marriages, divorces, deaths, business restructures, should trigger a deed review.

2. Create or update a trust charter

A charter can address:

  • succession intentions for trustee and appointor roles
  • the philosophy behind distributions
  • how beneficiaries should communicate concerns
  • expectations regarding involvement in the family business
  • protocols for conflict resolution.

It means that all beneficiaries are “on the same page” and it reduces emotional decision-making.

3. Clarify trustee and appointor succession

Succession for these roles should be explicitly documented. Consider:

  • who should take over, and whether they have the skills
  • whether multiple appointors or trustees should act jointly
  • how disputes between co-appointors will be handled
  • what happens if successors divorce, die, or become incapacitated.

4. Prevent power imbalances

Many disputes are triggered when one family member gains disproportionate control. Solutions include:

  • using corporate trustees with independent directors
  • appointor committees rather than a single appointor
  • including “fit and proper person” requirements for decision-makers
  • requiring successor training or external advice.

5. Document decision-making carefully

Courts expect trustees to act impartially and for proper purposes. Keeping clear records of decisions, especially when it comes to distributions, investments and amendments, can reduce the likelihood of misconduct allegations.

If you’d like support reviewing your trust governance or establishing a family charter, our team can guide you through the process.

i Key lessons from high court trust litigation

The impact of the US/Iran war on economies and markets: Q and A

· ·

Key points

  • Uncertainty around the duration of the US/Israel war with Iran has intensified with oil prices spiking to $US119/barrel only to then plunge as President Trump hinted that the war may be close to over. This is in turn driving big gyrations in investment markets. /p>
  • While a limited war remains more likely than a long war, it could still push oil prices higher & shares lower in the near term. Trump may be getting close to an off ramp though.
  • For the RBA, there is a strong case to wait till May on rates as the boost to inflation could prove temporary.

Introduction

Oil and investment markets initially reacted relatively calmly to the US/Israel war with Iran, despite the Strait of Hormuz through which 20-25% of global oil and gas supplies flow through on a daily basis being closed from the get go. However, as the war has continued with the Strait remaining effectively closed uncertainty has intensified. Coming into the second week of the war oil prices surged to $US119 as the pace of Iranian drone and missile attacks on its neighbour stepped up again, Iran’s decision to replace Ayatollah Ali Khamenei with his son suggested it’s not in a rush to surrender, as various Gulf countries shut oil and gas production and Trump downplayed the surge in oil prices as “a very small price to pay.” They then plunged back to around $US83 as Trump hinted the war could be over “very soon” noting that it was “very complete, pretty much”.

But uncertainty remains high as he also said he did not believe it would be over this week and that he would “not relent until the enemy is totally and decisively defeated.” So oil prices then bounced back to around $US89 at the time of writing. Gas prices in Europe are also up around 80% since the war started. Bond yields have increased on worries about a boast to inflation. And from this year’s highs to recent lows US shares have had a fall of around -2.5%, Eurozone shares -8%, Japanese shares -10% and Australian shares -6.5% on the back of worries about a hit to growth. This note provides a Q&A around the key issues.

How high will oil prices go?

With their spike yesterday oil prices roughly doubled from their lows early this year taking them back to their highs around the start of the Ukraine War. The 1973 OPEC oil embargo saw a fourfold increase in prices (albeit from a much lower base even in today’s dollars) and the second oil shock in 1979 saw a threefold increase. Both reflected supply cuts with the second shock seeing a 5% hit to supply on the back of the Iranian revolution.

While Trump has made assurances about reopening the Strait of Hormuz at present its still effectively shut, meaning a 20-25% hit to global oil and gas supplies. An optimistic take is that this may be reduced to a 15-20% supply hit if various pipelines can be used. But with global oil demand being relatively inelastic in the short term such a supply setback risks pushing the oil price to say $US150-200/barrel the longer the supply disruption persists as inventories run down. Reports of a release from the G7 oil reserves if realised may provide relief but it will only be temporary if the war and oil disruption continues.

World oil prices in nominal and real terms

Source: Bloomberg, AMP

What is the flow on to petrol prices?

In Australia, each $US1 a barrel rise in oil prices roughly adds around a cent a litre to petrol prices. So, if the oil price settles around $US100 for a while  it would mean a rise of $US40-50 from January lows and roughly a 40-50 cents per litre rise in petrol prices. This would normally take 7-10 days to fully show up but petrol prices have already moved up partly due to the normal discounting cycle in some cities and a catch up to the rise that occurred prior to the war starting.

Australian petrol prices versus oil price

Source: Bloomberg, AMP

What is the threat to growth?

Higher oil and gas prices will depress economic activity because they act like a tax on businesses and consumers leaving less money to spend elsewhere in the economy. Past oil price surges have played a role in US & global downturns. As can be seen in the next chart, the threat becomes significant once oil prices double – which they have come close to doing since the start of the year with yesterdays spike, although not if measured from a year ago.

Oil prices and US economic growth

Note: the relationship between oil prices & GDP looks messy over 2020/2021 as oil prices crashed with the pandemic and then rebounded into 2021 but were still low. Source: Bloomberg, AMP

A 60 to 70% decline in the oil intensity of GDP since the 1970s thanks to energy efficiencies and the bigger services sector across the US, global and Australian economies mean their impact will be less than it used to be. Rough estimates by Goldman Sachs indicate that a spike in oil prices spike to around $US100/barrel will knock around 0.4% off global growth over the year ahead. With Europe and Asia (which are net energy importers) more affected than the US (as the US is a net energy exporter).

While Australia is also a net energy exporter it is likely to see a similar sized hit to growth as a result of weaker consumer and business confidence and as higher petrol prices lower household disposable income. Our rough estimate is that oil prices around $US100 and the flow on to petrol prices will cost the average Australian household an extra $14 a week or $730 a year, which will lower their ability to spend. At the same time consumer confidence readings taken late last week as the war intensified show a sharp 7% plunge which will likely depress spending.

The weekly petrol bill for a typical Aust household

Source: Bloomberg, AMP

What is the impact on inflation?

Our rough estimate is that oil around $US100/barrel will directly add around 0.8% to inflation in Australia, pushing it up to around 4.6%yoy. There may be another 0.1-0.2% added due to higher transport costs and a flow on to goods like fertiliser and plastics that use oil but this may be offset in terms of underlying inflation by the impact of weaker spending in the economy reducing underlying pricing power.

What does it mean for interest rates in Australia?

For the RBA, the implications are ambiguous but with a bias to higher rates. The case for higher rates is that inflation is already above target and a further big boost to headline inflation to above 4% will threaten higher inflation expectations making it even harder for the RBA to get inflation back down. These concerns likely explain RBA Governor Bullock’s more hawkish tone last week. The case to hold is that the boost to inflation may be brief if the War ends in the next few weeks and the negative impact on demand in the economy could lead to lower underlying inflation.

On balance we expect the RBA to wait till May before deciding what to do on rates, but to sound hawkish in the interim.

Why have share markets fallen?

Shares have fallen because the surge in oil prices is threatening a negative combination of higher inflation, bond yields and potentially central bank rate hikes on the one hand and lower economic growth and profits on the other. This has also come at a time of increased uncertainty around the disruptive impact of AI and stretched valuations. So, shares were vulnerable to a pullback, and the war may have provided the trigger. We have been of the view that while global & Australian shares will have okay returns this year they are likely to have a 15% or so correction on the way.

Why is the $US up and the $A down?

Consistent with the risk off tone the $US is up (because it’s a net oil and energy exporter) particularly against the Euro (which is a net energy importer). The $A is down because of fears about global growth but it has held above $US0.70 because while it’s a net oil importer it’s a net energy exporter and will benefit from higher gas prices and because the RBA is still expected to raise rates whereas the Fed is still expected to cut rates.

How long will the war last and oil remain disrupted?

This is the key issue. Trump is under big pressure to keep it short and avoid troops on the ground – polls show little support in the US for this War (around 27%), compared to 70% or more for Iraq I and II and Afghanistan, most of his MAGA base was motivated by a desire to stay out of wars and surging gasoline prices will go down badly into the midterm elections. And it could be argued that the US is at or close to success on several of its four stated goals which are:

  • Dismantling Iran’s missile forces – close.
  • Destroying its navy – done.
  • Stopping its nuclear weapons development – largely done.
  • Cutting of its regional terrorist groups – to be seen.

This suggests that Trump may be getting close to finding an off ramp. Hence his comments that the war may be close to over. So our probabilities on the two key scenarios remain:

Limited war (60% probability) – given these considerations our base case is that the war is limited with Trump likely finding a way to declare victory sometime in the weeks ahead. This may still take a few more weeks so oil prices could still go higher (seeing further falls in shares) before they go lower (shares higher). This would ultimately be a selling opportunity in oil and a buying opportunity in shares. Trying to time it will be hard though.

Long war (40% probability) – however, while Trump may want to declare victory soon, Iran may not play ball and has an incentive to prolong the surge in oil prices and hence the cost to Trump and US consumers. So far it’s not playing ball, with a defiant new leader. Iran could also descend into chaos with various military groups continuing to threaten ships in the Strait of Hormuz. This could necessitate a longer-term US involvement and mean a much longer disruption to oil, conceivably resulting in oil prices going to $US150 & beyond driving a sharp sustained fall in shares.

Key to watch for will be a sustained fall in missiles & drones coming from Iran, indications Iran wants to negotiate and a 10% or more top to bottom fall in US shares which may up pressure on Trump to find a way out.

What should super members do?

While no one likes to see their wealth go backwards, periodic setbacks are an inevitable aspect of investing. Given the difficulties in trying to time markets, the key for investors is to stick to an appropriate long-term investment strategy.

Dr Shane Oliver – Head of Investment Strategy and Chief Economist, AMP

Important note: While every care has been taken in the preparation of this document, neither National Mutual Funds Management Ltd (ABN 32 006 787 720, AFSL 234652) (NMFM), AMP Limited ABN 49 079 354 519 nor any other member of the AMP Group (AMP) makes any representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This document has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This document is solely for the use of the party to whom it is provided. This document is not intended for distribution or use in any jurisdiction where it would be contrary to applicable laws, regulations or directives and does not constitute a recommendation, offer, solicitation or invitation to invest.

The EOFY jobs that might matter more than you think

· ·

As the end of the financial year (EOFY) approaches, investors often focus on topping up super, maximising deductions, prepaying interest or reviewing portfolios. While these are all valuable activities, there are some less obvious tasks that can have a big impact on your tax position, wealth preservation and long-term planning outcomes.

Here are five areas that investors can often miss in EOFY planning.

 1. Capital gains in volatile markets

Investment markets have been volatile in recent years, with rapid movements in equities, property and fixed income. When investors buy and sell during choppy market periods, capital gains tax (CGT) considerations become even more important.i

It is the ideal time to assess whether:

You should realise gains this year or defer them – The decision can hinge on:

  • Expected income this year vs next year
  • Whether you qualify for the 50 per cent CGT discount
  • Available capital losses
  • Investment timeframes and risk appetite

You have unused capital losses – Losses can be used to offset realised gains, but they cannot be used against ordinary income. Some investors may find that realising strategic gains before 30 June allows them to “unlock” unused losses that have been sitting dormant.

Be aware of “wash sale” rules. Some investors plan to sell an asset to realise a loss and then quickly buy it back. The ATO calls this a wash sale and may deny the loss.ii

2. Superannuation recontribution strategies

A super recontribution strategy is sometimes overlooked because it requires coordination between pension payments, contributions and tax components. But, when used appropriately, it may significantly reduce future tax for beneficiaries and increase flexibility in estate planning.iii

This strategy usually involves withdrawing a portion of your super (usually from the tax free and taxable components proportionally), then recontributing these funds back into super as a non-concessional contribution (if you’re eligible).

The result is that more of your balance becomes tax free, which can reduce or eliminate the “death benefits tax” that applies when super passes to non-dependent beneficiaries, such as adult‑children.iv

3. Bringing forward deductions and deferring income

While prepaying expenses and deferring income is a well-known EOFY strategy, it may not be successful for everyone, so check carefully that it’s useful for you.

Bringing forward deductions – You may be able to prepay, interest on investment loans, income protection premiums, ongoing advisory fees, and professional subscriptions. But if you’re approaching income thresholds (such as Medicare Levy Surcharge minimums, private health insurance rebates or HECS/HELP repayment bands) it’s important to calculate whether prepayments will actually deliver you a benefit.

Deferring income – Small businesses using cash accounting may be able to defer invoicing until July and investors might choose to delay receiving distributions or bonuses. But don’t forget that deferring income may affect borrowing capacity or government payments.

4. Managing Division 7A loans

Division 7A can catch business owners off guard at EOFY. These rules apply when a private company lends money, pays expenses or provides assets to shareholders or their associates. If not handled correctly, the ATO may treat the payment as an unfranked dividend, resulting in significant unexpected tax.v

To stay on top of your Division 7A obligations:

  • Confirm all loans are documented
  • Check minimum yearly repayments
  • Consider whether to repay, refinance or restructure
  • Don’t forget about company-paid personal expenses

A well-timed review can prevent unintended tax consequences and keep your structure compliant.

5. Reviewing your records

Another often missed EOFY task is checking that your records and substantiation are complete before preparing your tax return.

The ATO is increasing its use of data matching programs, so having accurate documentation is essential. This includes keeping receipts for deductible expenses and retaining statements for managed funds and other investments.

EOFY planning is about much more than topping up super or gathering receipts. Hidden traps like CGT and Division 7A timing can create unnecessary tax if ignored, while proactive strategies such as recontributions can deliver long-term estate planning benefits.

By taking a structured approach, you can ensure every part of your financial picture is working together, and no opportunity is missed. We’re here to help. Please give us a call.

i Capital gains tax | ATO

ii Wash sales: The ATO is cleaning up dirty laundry | ATO

iii Super recontribution strategy: How it works | SuperGuide

iv Paying superannuation death benefits | ATO

v Loans by private companies | ATO

Protect and grow wealth in uncertain times

· ·

Interest rate swings, market volatility and global tensions make one thing clear: wealth management needs both protection and growth strategies to thrive.

Finding the balance between driving growth and safeguarding capital takes a disciplined approach to portfolio construction but it could help your wealth to endure, despite the ups and downs of the market and the impact of inflation on your purchasing power.

Many investors equate balance with diversification alone. But balance means understanding how each investment or exposure contributes to the twin goals of growth and protection and whether the portfolio is robust enough to withstand challenging times.

There’s no one-size-fits-all answer. Depending on age and stage in life, some investors are chasing aggressive growth while others want capital preservation. The key is to ask:

  • What am I earning and why? (High returns usually mean higher risk – are you comfortable with that?)
  • How will the portfolio behave when it matters most? (Will it cushion losses or make them worse?)
  • What investment decisions will I regret if inflation persists (for say, the next five years) or markets tank?

A US study of almost a century of data confirmed that portfolios handle downturns better and recover faster if they combine growth assets with true diversifiers, including a mix of low-correlated investments and defensive assets.i

Low-correlated investments are assets that don’t move in the same direction as equities, helping to reduce overall portfolio volatility. Their correlation to stocks is low or even negative. Examples include government bonds, gold, some hedge fund strategies and commodities.

Defensive assets are expected to hold their value or outperform during market downturns. They’re chosen for stability and capital protection. Examples include cash, high-quality bonds, defensive equities (such as utilities, healthcare) and infrastructure.

The ‘cost’ of growth

Growth typically comes from listed equities, private equity, venture capital, real assets and exposures to big, long-term trends that may cut across multiple sectors. For example, healthcare innovation, energy transition or AI.

The catch? Growth invariably means volatility. If the markets dive you could feel pressure to sell at the worst time.

Defensive equities may help provide some balance. They’re shares in companies that tend to provide stable earnings and dividends regardless of whether the economy is booming or in a recession. They have strong cash flow because they sell needs rather than wants, such as power, food and medicine, and they have the ability to raise prices to cover rising costs without losing customers.

While portfolio protection starts with bonds and cash, some would say they’re not enough today and a broader range of assets may be more beneficial.

Bonds, for example, have lost a little of their shine as the chief risk stabiliser after a crazy five years or so. The rollercoaster ride of historic low interest rates during the Covid era to the great reset from about May 2022 when the RBA’s (and the US Federal Reserve) rate hikes began. Both stocks and bonds crashed. Today, bond investors are enjoying a ‘rare sweet spot’ with yields well above the pandemic lows.ii

Because yields are higher, bonds now provide a significant income buffer. If bond prices fall slightly, the high interest payments can offset that loss. If rates stay the same or fall, investors lock in those higher yields.

Since most economists believe the hiking cycle is over or nearing the end, there is a chance that as central banks eventually cut rates, bond prices will rise, giving investors both high income and capital gains.

Other strategies

Other protective strategies may include buying bonds that mature at different intervals, such as every year for five years. Known as a bond ladder, this strategy means a portion of your money becomes available every year and it may provide some interest rate protection.

Physical investments, or real assets, such as real estate, infrastructure, commodities, natural resources and equipment can act as a hedge against inflation. When the cost-of-living increases, the value of physical assets tends to rise as well.

Alternatively, you could consider floating rate exposure or inflation-linked bonds (known as Treasury Indexed Bonds or TIBs in Australia and Treasury Inflation-Protected Securities or TIPS in the US).

Floating-rate bonds adjust interest payments as rates change, while TIBs increase principal and interest when inflation rises, providing a hedge against rising prices.

TIBs offer further protection with a built-in deflation floor that protects your original investment if prices fall.

Currency is the silent player

If you invest globally, currency matters. So, foreign exchange planning should be an intentional decision rather than a portfolio by-product.

The Australian dollar often falls when global markets panic so unhedged overseas assets can act as a shock absorber.iii

But full exposure can swing returns wildly. On the other hand, a partial hedging policy, for example, hedging some developed-market bond exposures, may balance volatility and opportunity.

Finally, protection is a liquidity plan. For families using trusts, SMSFs or investment companies, keep enough cash or short-term assets to cover 12–24 months of cash needs (tax, capital calls, distributions). That’s real protection.

Please give us a call to check your portfolio meets your current needs for growth and protection.

Portfolio protection in a nutshell

  • Include defensive equities and quality bonds
  • Diversify with low-correlation assets
  • Consider inflation-linked bonds or floating rate exposure
  • Maintain liquidity for 12-24 months of cash needs

i It Was the Worst of Times: Diversification During a Century of Drawdowns

ii A terrific environment for bonds | Vanguard Australia FAS

iii Drivers of the Australian Dollar Exchange Rate | Explainer | Education | RBA