What is a bloodline trust in Australia?

A bloodline trust (also called a lineal descendant testamentary trust) is a type of testamentary trust created under your Will that restricts the flow of capital exclusively to your lineal descendants — your children, grandchildren, and their children. Unlike a standard testamentary trust, the trust deed expressly prevents trust capital from passing to spouses, in-laws, or any person who is not a blood relative of the original Will-maker. Under Victorian law, a bloodline trust operates as a discretionary trust with a restricted class of capital beneficiaries.

How does a bloodline trust protect against divorce?

A bloodline trust can protect inherited assets from a child's divorce because the capital of the trust is legally owned by the trust itself — not by your child as an individual. Under the Family Law Act 1975 (Cth), the Family Court has broad powers to consider trust assets, but where a beneficiary does not control the trust and the trust deed clearly restricts capital to lineal descendants only, the trust assets are in a stronger position than outright inherited wealth. The ex-spouse is not within the defined class of capital beneficiaries and cannot receive a capital distribution regardless of any divorce proceedings. We recommend seeking legal advice specific to your circumstances, as each case is assessed by the Court on its facts.

What happens to a bloodline trust if a child dies before their parent?

Under a bloodline trust, if a beneficiary child dies, their share does not automatically pass to their surviving spouse. Instead, the trust deed directs the trustee to hold and manage the assets for the deceased child's own children (the Will-maker's grandchildren). This is one of the key features that distinguishes a bloodline trust from a standard testamentary trust — the assets remain within the bloodline regardless of what happens to any individual beneficiary.

What is the difference between a bloodline trust and a standard testamentary trust?

A standard testamentary trust typically includes a broad class of beneficiaries — children, grandchildren, spouses, in-laws, and sometimes other relatives. Capital and income can be distributed to any member of that class at the trustee's discretion. A bloodline trust (or lineal descendant testamentary trust) narrows the capital beneficiary class specifically to lineal descendants — blood relatives only. Spouses and in-laws are excluded from receiving capital, though a bloodline trust can be drafted to permit income distributions to a broader class (including spouses) for tax planning purposes, while keeping capital strictly within the bloodline.

How long can a bloodline trust last in Victoria?

In Victoria, a bloodline trust (like all non-charitable trusts) is subject to the perpetuity period of 80 years under the Perpetuities and Accumulations Act 1968 (Vic), which reformed the rule against perpetuities. A trust deed must provide for the vesting of trust property within this 80-year period. This means a bloodline trust established today could protect your family's wealth across three to four generations — from your children and grandchildren through to great-grandchildren — before the trust must ultimately vest and distribute its assets.

Can a bloodline trust be challenged under a family provision claim?

Assets held in a properly constituted testamentary trust generally do not form part of the 'estate' available for a family provision claim under Part IV of the Administration and Probate Act 1958 (Vic) once the trust has been established and assets transferred. However, the notional estate concept and the Court's broad powers mean professional legal advice is essential when structuring any trust intended to manage family provision exposure. We recommend discussing your specific circumstances with an estate planning lawyer.

Can income be distributed to spouses under a bloodline trust?

Yes — a bloodline trust can be drafted with two distinct beneficiary classes: a narrow capital beneficiary class (lineal descendants only) and a broader income beneficiary class that includes spouses and in-laws. This allows the trustee flexibility to distribute income to a wider group for tax planning purposes, while ensuring the capital of the trust — the real wealth — can never pass outside the bloodline. The exact drafting of these classes is critical and should be prepared by an experienced estate planning lawyer.

Who should consider a bloodline trust in Australia?

A bloodline trust is particularly suitable for: high-net-worth families concerned about multi-generational wealth preservation; parents who have concerns about a child's current or future relationships; families with business assets, investment properties, or significant liquid wealth they wish to preserve for blood descendants; individuals in second marriages or blended families where previous children's inheritances need protection; and anyone who has seen family wealth eroded through divorce or relationship breakdown in previous generations.

Bloodline Trusts in Australia: Protecting Inherited Wealth for Generations

Estate Planning 11 March 2026 14 min read