How Can a Trust Protect a Family Business?

A trust can protect a family business by placing ownership with a trustee who acts as a single, stable shareholder. This separates ownership from management, prevents fragmentation across family members, and provides continuity through succession events such as death, divorce, or incapacity. The trust structure also enables formal governance mechanisms, including protector committees and letters of wishes, which help align the business with the family's long-term values.

What is the role of a trustee in a family business trust?

Trustees act as the legal owners and decision-makers for assets held in trust, including family business shareholdings. Their fiduciary duty requires them to act in the best interests of the beneficiaries, consider investment suitability, monitor business performance, and take professional advice on major decisions. In a family business context, trustees typically sit above a holding company structure and oversee governance without managing the business day-to-day.

What rights do trust beneficiaries have in relation to the family business?

Beneficiaries do not have an automatic right to trust information, but they do have the right to ask for it and, if refused, to seek court intervention. Under the principle established in Schmidt v Rosewood Trust Limited [2003], beneficiaries can generally expect to know of the trust's existence, the nature of their interest, the trust deed, and the trust accounts. Letters of Wishes are private to the trustees and do not need to be shared.

What is an anti-Bartlett clause in a trust

An anti-Bartlett clause is an exoneration provision in a trust deed that relieves trustees from the duty to actively monitor and intervene in the management of a business in which the trust holds shares. It derives from the case of Bartlett v Barclays Bank Trust Company Limited [1980], which established that trustees of a majority shareholding have a duty to act as a prudent person of business. Anti-Bartlett clauses have limitations and offer no protection if trustees are put on notice of problems or if they actively involve themselves in the business.

Should a family business use a trust or a Family Investment Company?

Both structures can be effective for holding family business assets, and the right choice depends on the family's circumstances, jurisdiction, and goals. Trusts offer long-term flexibility, beneficiary protection, and strong governance frameworks, but involve handing legal ownership to trustees. Family Investment Companies (FICs) allow family members to retain more direct control through shareholdings and board participation, and many business families find the corporate structure more familiar. Both options should be considered alongside professional legal and tax advice.

How do trusts help with generational wealth transfer?

Trusts provide a controlled framework for passing family business ownership to future generations without triggering fragmentation or family conflict. They enable intergenerational collaboration through regular trustee-beneficiary meetings, structured governance, and letters of wishes that embed the founder's values. Trusts also allow the next generation to be progressively introduced to family wealth and business responsibilities, reducing the risk of ill-prepared beneficiaries inheriting significant assets without preparation.

What are the main disadvantages of placing a family business in trust?

The main disadvantages include the cost of professional trustees and advisers, the perceived loss of control by the founding family, and the complexity of trust administration in an increasingly regulated environment. If the trust deed is drafted too rigidly, or if beneficiaries are not adequately educated about the trust structure, disputes can arise. Tax advantages are also often overstated, and families should not settle a business into trust primarily for tax reasons, as one regime is typically replaced by another.

What is a protector in a family trust?

A protector is an individual or committee appointed within a trust structure to provide oversight of the trustees. They ensure the trust continues to reflect the settlor's intentions and the beneficiaries' evolving needs. A protector may have veto powers over certain trustee decisions, the ability to appoint or remove trustees, and powers to adjust the beneficiary class. For large family businesses with multiple generations, a protector committee with rotating membership can be an effective governance tool.

Insights

3rd Jul 2026

STEP Handbook For Advisers – Chapter 10: Trusts and Family Businesses: The Ideal Succession Solution

The new edition of ‘Business Families and Family Businesses’, co-published with STEP, is a fantastic showcase of insight from leading advisers across the family business space.

Chapter 10: “Trusts and Family Businesses: The ideal succession solution?” written by Nic Arnold and Victoria Blackburn of JTC Private Office together with Bryony Cove and Jennifer Ridgway of Farrer & Co and edited by Claire Stirzaker of Boodle Hatfield, explores how trusts can support succession planning, governance, continuity and long-term stewardship in family businesses. A valuable contribution to an important conversation for business families and their advisers.

STEP. The STEP Handbook for Advisers, Third Edition. STEP, 1 Apr. 2025.

Chapter 10: Trusts and Family Businesses: “The Ideal
Succession Solution?”

Read the Chapter The STEP Handbook

Is your family business protected for the next generation?

Whether you’re considering a trust structure for the first time or reviewing an existing arrangement, JTC Private Office works with families to build governance frameworks that protect business assets, manage succession, and preserve wealth across generations.