Asset protection - buying in a Trust

I just heard a horrible story from another forum member. A family member of this person was a guy who was single. He worked and saved for many years and bought a nice home and paid it off pretty quickly. Several years down the track, he then met his wife, they had some kids, and then another few years down the track they split up.

In a nutshell, this guy was booted out of the house he bought about 5-10 years before even meeting his wife, now she's living in this house with her new man and the kids and he's broke renting a one bedroom apartment.

Obviously there is much detail I'm missing out - although what could someone do to protect themselves in such a case? I'm sure most people would want their kids looked after in such a situation, but it would be good to have some choice in the whole thing rather than being forced.

I was thinking - if had purchased the house in a family trust with his parents and siblings as beneficiaries, and then it was used as a family home, in the event of the divorce would it not be so simple as it being handed over to the wife and her new man, given the house is jointly owned by the guy, his parents and his siblings? (all owning it together, not separate shares or % splits)?

 

Sorry I don't follow. Are you suggesting asset protection via debt?

 

I'm curious how you got that suggestion of asset protection via debt from literally 2 words "finance nightmare"

In this case though like you said you're missing a lot of detail, without it there's no context and the circumstances of your friend could entirely fair or could be harsh, impossible to ascertain. I've found that many horror stories have actually turned out to be not all that unfair but the family court does sometimes get it wrong

 

The classic case of boy meets girl and girl meets boy with house. Girl then takes house after boy of HER dreams walks into her life.

The best protection is stay single and don't even think about it.

 

As a family lawyer, it sounds exactly like this.

It sounds more like a temporary situation for this guy anyway, and no sign of whether he's actually started to enforce his legal rights.

 

Will a trust help? Yes. Is if a sure thing? Nope.

 

I just didn't follow, that's all. Wouldn't it just be like financing any other trust property? (i.e. just have one person get a loan for it).

The financing and the beneficial ownership are separate things, or so I thought.

 

There are many ways people should protect themselves. Legal advice costs money and many people choose a conveyancer and bypass the discussions about estate planning, wills and trusts when they buy IPs and also before they marry etc. Saving money on legals can cost more money later. A trust isnt a magic shield.

There are always facts that affect every story. If Fred had bought three IPs in a trust and used family income etc then the Family Court would bring the trust to the table. You cant use a family trust to bypass the court. But when Fred got married he may have been able to have a binding financial agreement to limit the trust exposure. Putting a family home in a discretionary trust during marriage is just asking for the family court to include the trust as matrimonial property (not to mention loss of CGT concessions)

And then there is death. You can leave all your assets to your wife in a will. You die. She remarries. What might your kids get ? If she dies before her new hubby its possible its nothing.

 

Trusts can be attacked in family law matters in several ways such as
1. Trust assets are property of the relationship
2. Trust is a financial resource of these parties to the relationship
3. Orders against the trustee such as to transfer property
Etc

A trust could be set up so as to be safer from attack but compromises must be made with controlling the trust and finance could pose difficulties.

 

My experience with clients at the family court is that the court very much attempts to be fair. I have never seen one person walking away "rich" and the other person becoming "penniless" due to the directions of the family court.

The short answer is that if you want proper protection from the family court you should look at a binding financial agreement with your new spouse. And you should deal with a good family lawyer to do that - somebody who you meet and get a full understanding of the process.

 

The last 3 posts have said it much better than I can, fwiw @Orion I have a lot of respect for the opinions of these 3 professionals, you'd do well to pay attention to what's been said imo

 

Hi

This is excellent advice and comes with a double whammy. I find that from the money I am able to save by not spending $$$$'s on dresses and shoes for my partner every 2nd weekend I can continue to purchase investment properties every 3 to 4 years!

Regards,

alicudi

 

Hi,

My brother bought a house, owned it for 10years (still had a mortgage), got married, had 2 kids, wife ran off with another bloke, got divorced and guess what happened to the house? Nothing! He is still there living his life. Your story does lack a lot of detail like percentage of care, contribution to marital assets, ability to earn etc. His ex-wife did go after the house but perceiving you are entitled and being entitled are 2 different things. Agree with @Ross Forrester.

Relationships = risk, only you know if it’s worth it.

Kassy

 

OK sounds good guys. It seems like I've paid too much attention to the horror stories out there, where it seemed in most cases its the guy who ends up worse off.

It's good to hear that it's more fair than that.

 

Agreed.

Just FYI, the actual research being done on the issue quite strongly suggests that the non-financial spouse (usually a woman) ends up much financially worse off moving forward, even taking into account current family laws.

Its usually because of the 'double whammy' effect of giving up career advancement opportunities in lieu of parenting contributions during the relationship, and then being saddled with the bigger % single parenting responsibilities in the period after separation.

Meanwhile the financial spouse gets to work through the whole time largely unimpeded.

I'm stereotyping of course, but it does often explain the big adjustments that you might see in certain cases and why some men feel like its so "unfair".

 

And spend on what.....more IPs.....and more and more.....?
We as humans tend to think we will wake up tomorrow but what if tomorrow never comes?
IMHO, money is to be accumulated, I agree, but some is also to be spent and shared, otherwise what's the point?

 

The 'unfair' / horror stories I've read about usually have the following themes (and again, I don't vouch for the accuracy of these, this is just what I've read on the net):

• The mother makes up stories about the father being a deadbeat in some way - be it domestic violence, hitting the kids, something like that. Little to no proof is required and the courts side with the mother.
• The father doesn't get to see his kids as much, having to fight hard for the little access they do get.
• Suicide rates among these 'forgotten' fathers are very high (as they are for men in general to start with).
• The missed career advancement opportunities are exaggerated (given that on average, we all average) - i.e. on average you would imagine an entry level job up ($40k pa) to an average wage ($70k pa)

Obviously what I've written is full of generalisations, I'm just repeating what I've read on other forums, blogs and from older Facebook guy friends who have gone through this, which I understand is only the guys point of view. I'm sure the women's side of view has an equal amount of horror stories.

Special note - I understand this type of discussion can be sensitive. Please know I don't intend to upset anyone, I just want to challenge what seems to be an inaccurate view of unfairness in theses situations.

 

unless you have read the relevant applications, disclosure, affidavits etc it's difficult to get the full story.