discretionary trust as an individual for asset protection

Hi all, I’m looking into setting up a discretionary trust to invest in property.
I work in a litigious industry and want to make sure my assets are protected in the event that I ever get sued (which is hopefully never, but I’d like the peace of mind, just in case).
Since the trust is just to protect my own assets (family will not be involved) I want to retain full control over it. Can I be appointer, sole beneficiary and acting trustee if I make myself sole director/shareholder of a company that is named as the trustee?
Should I lend or gift the trust funds to buy property?
What happens to the trust if I move overseas? Are there tax implications if I am non-resident in Aus?
I understand that as sole shareholder of the company, it’s possible that creditors can take my shares of the company to instate a new director and thus gain control of the trust. As an individual who wants full control of the trust, how do I protect against this?
Thanks in advance.

 

Can I be appointer, sole beneficiary and acting trustee if I make myself sole director/shareholder of a company that is named as the trustee?
you are the trustee or the company is the trustee? You cannot hold asset on trust for yourself so you could not be the trustee and sole beneficiary. If you were the sole beneficiary of a discretionary trust there would be virtually no asset protection

Should I lend or gift the trust funds to buy property?
Depends

What happens to the trust if I move overseas? Are there tax implications if I am non-resident in Aus?
Depends. If the trust is a non resident it will be a non-resident trust

I understand that as sole shareholder of the company, it’s possible that creditors can take my shares of the company to instate a new director and thus gain control of the trust. As an individual who wants full control of the trust, how do I protect against this?
many ways to tackle this. But if you are an appointor you could change the trustee before bankruptcy - potentially.

Sounds like you don't really understand the complexity of this area of law. Get some legal advice - from a lawyer.

 

I am awaiting an appointment with a lawyer, but would like to have an idea of what is entailed beforehand so I don’t go in completely knowledgeless.

I spoke with someone from the law firm on the phone, who said it’s not possible to be trustee, sole beneficiary and appointor, but can I get around that by having a company as trustee (and making myself sole director of the company). The guy at the law firm was unsure on this matter.

How is there no asset protection if I’m sole beneficiary? If I get sued, can assets be seized if they’re not in my name, but in the trust’s name? And how is it possible to get around this if I’m only interested in protecting my own money (I have no spouse or dependants)?

Thanks

 

Terry, does having a parent as the named beneficiary change anything?

 

What industry do you work in? Is there professional insurance?

 

There are several issues for non-residency. A person "ordinarily resident" today may later depart the country and then land tax surcharges etc and even surcharge rates of duty can apply to acquisition if the family of the primary beneficiary are not considered. Departing Australia may also expose what seemed asset protected to further risks. A poor choice of trustee / Director can affect family trust elections, land tax, duties, estate issues and more.

A solicitor is likely to never recommend a human trustee over a corporate trustee where professional indemnity and risk is at a high degree and the person seeks to retain personal control.

I would agree that personal legal advice should be obtained. Sometimes the same person (a solicitor) can provide both legal and tax advice but as many solicitors dont practice in tax their knowledge and advice may be less specific than a tax adviser. Thus two views may be required. I encountered this a few days ago. The legal adviser failed to mention NSW land tax surcharge and the premium duty that applies when a disc trust buys property in NSW and doesnt correctly address the deed and the beneficiaries in this case one family member with a interest being clearly a non-resident. While they mentioned loads of issues about disc trust this primary issue was skipped and was quite material to the taxpayers position. The legal adviser also omitted the FIRB. (Foreign Investment Review Board)

I am seeing a increased number of people buy property with a foreign part owner which is exempt who now seek to undertake changes to the property. Legal advice about the FIRB approval regime is an essential element.

 

It would be very unlikely to have a discretionary trust with one beneficiary. I have never seen or heard about it other than a theoretical in one of the famous asset protection cases.

If you are the sole beneficiary you will have an interest in the property of the trust. If you become bankrupt the trustee in bankruptcy will stand in your shoes and as sole beneficiary of the trust vest it - under the rule in saunders and Vautier.

Assets cannot be in a 'trusts name' as the trust doesn't exist. It is a relationship not a legal entity. Assets will generally be in the name of the trustee.

Simple solution is to have an open class discretionary trust with a wide range of beneficiaries including charities.

 

Yes it would change a lot.

 

Assets cannot be in a 'trusts name' as the trust doesn't exist. It is a relationship not a legal entity. Assets will generally be in the name of the trustee.

So if I want to purchase a property (or other asset) in the trust I put the name of the company (that is the named trustee) on the offer instead of the name of the trust?

Simple solution is to have an open class discretionary trust with a wide range of beneficiaries including charities.

Great - that’s really helpful and in line with what I would want anyway.

 

see my legal tips, I probably have close to 100 tips on trusts and asset protection

Terryw's legal Tips Index

 

...simple solution?

I hope you were also paying attention to the rest of what's been said here as well!

@Terry_w I think has mentioned in other threads how often a trust structure actually ends up being the best structure for clients that approach him - and its a lot less than you probably think.

 

Simple ? A class disc trust will have some concerns for the NSW OSR

Duty + Land tax.

-

 

We have no reason to think NSW duty law applies based on the above. But it could.

To the op - what state do you propose to buy land in?

 

Book a consult with @Terry_w he is a lawyer who knows tax.

No point discussing with an accountant they simply cant provide the relevant advice needed

Why waste money on two advisers when a competent lawyer versed in tax can do the same.

Many largers firms have their own in house legal as well now. Bluerock is one that has accounting and legal together.

 

Yes I agree Terry does have those dual skills