Legal Tip 232: Getting your wage deposited into a trust Bank Account

Discussion in 'Legal Issues' started by Terry_w, 15th Aug, 2019.

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  1. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

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    Getting your wage deposited into a trust Bank Account

    A client has advised they were ‘advised’, on an expensive course, to deposit their wage into a bank account of the trustee of a trust rather than into their own personal bank account.

    This is for asset protection supposedly.

    The idea is that the money never touches your account so it cannot fall into the hands of creditors.

    How silly!

    In situations such as this, the trustee would be holding the money for you as bare trustee. There is no asset protection if you were to go bankrupt, die or go through a family law property settlement as it is still your money.

    Furthermore, you have additional issues to consider such as what if the trustee

    a) Dies

    b) Goes bankrupt

    c) Loses capacity

    d) Gets divorced

    e) steals


    You would probably have worse asset protection issues.

    If you did end up bankrupt the money could easily be clawed back.


    Tip: Don’t do this without proper legal advice tailored to your situation.
     
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  2. Apollo

    Apollo Member

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    yes many problems with this one Terry
     
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  3. Apollo

    Apollo Member

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    Of course that assumes there is a trust. Likelihood is there is not due to the method of execution (or not) of the trust deed
     
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  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

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    If a trust deed is electronically signed it is not a deed. And the trust would be invalid.
     
  5. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

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  6. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    I would think it exposes the trust more than if the arrangement was not adopted. The alter-ego argument could be explored by a creditor. Salary and wages are earned...Dont need to be received to be property of the person. Many tax cases have sought to claim that earnings arent theirs but are trust property. Courts adopt the view that two transactions (? right word?) occur. One is the person earns remuneration and the second is they discharge it as a loan / gift likely on trust.
     
  7. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

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    It is likely the trustee of the trust will be considered to hold the wage of the person as bare trustee for the wage earner. so if the wage earner went bankrupt it is still their money and available to creditors.
    similar on a family law breakdown or a death.

    It would potentially get costly on death as the executor is legally bound to call in all debts owing and the trustee may resist this and litigation results.