Trusts Again - do they protect your assets?

Yes. I still have many years to hear the words "dad, I'm getting married!"

Back to topic, each person's circumstance is different. Trust is not a talisman. Seek independent legal advice. I won't be surprised there may be DIY trusts in the market like Wills kit. So what are you protecting your assets from? What's the probability? Get professional opinions.

 

Some people think that the mere existance of a trust is enough. Around the time you buy you merely say the words 'this is in the trust' and some special invisible forcefield surrounds the property. If you later go bankrupt you simply say, as your going down, 'that is trust property'.

 

The Richstar decision didnt give asset protection. Court held the trust as the alter-ego of the director. As Terry says its not a forcefield.

I had a client who got smashed by the ATO as they were a human trustee.

All reasons why sound legal advice would address personal situations.

 

Richstar is a bit of a unique case. I believe it involved a closed class discretionary trust so the person had something which approached a propriety interest in the trust. It was also a case brought by ASIC and it involved an injunction which, temprorarily, prevented sale of trust property. As far as I know the assets of the trust were not available to creditors.

 

My understanding - and I am no expert by any means - is that in general assets held in trusts are within reach of the family court.

 

Generally yes, but they would provide some level of protection and there are ways to structure things so that there is more protection.

 

If the trust is setup clearly with the intention of looking after your children and grandchildren, with no intention of their spouses being able to beneficiaries of the trust, then keeping it in the family is more easily achieved.

In normal circumstances then the family court can see through the trust and may well include the trust in a partner's asset pool. FC powers are wide ranging in this regard. Harder to get assets out of a trust though. Again, drafting of deed is crucial.

 

Don't forget Dr Spry wasn't a beneficiary of their family trust, nor was the wife, yet she beat him - the barrister and trust expert.

 

They're definitely within reach of the Family Court but a well structured trust may be able to keep assets out of the marital pool of assets. If the person has a clear right to benefit from the trust the Family Court won't hesitate to add that to the asset pool. If it's a discretionary trust with broad distribution powers to a broad class of people, how can the Family Court say the asset held on trust forms part of the asset pool when it realistically could be an asset that will be distributed to another beneficiary? This is why the terms of the trust are so important.

 

It seems there isn't a lot a Single person can do.

How can a Single person protect assets using Trust?
No family, no kids..seems impossible.

Thoughts or Insights?

 

Why does it seem impossible?

The assets of a properly set up discretionary trust are protected against creditors of a beneficiary - even if that beneficiary were to go bankrupt.

There are exceptions but these are if assets are transferred into a trust - but this will depend on how and when.

See the NSW Supreme Court case of Smith v Public trustee where such a trust was attacked - and survived.

 

I believe the family court considers who is the controller of a trust.

If a litigant in the family court is the guardian or appointor of a discretionary trust for example, then that person is considered the person with control of the trust. The assets of the trust are then treated as a financial resource of the litigant, resulting in the litigant receiving a smaller portion of the matrimonial assets.

I have not known the family court to add assets of a discretionary trust to the matrimonial pool, but may do so is the assets are held by a fixed trust.

A trust is not a general asset protection tool. It may protect assets in one circumstance, and fail in another.

 

There was a recent case involving a family business held by a discretionary trust. The adult son was the controller of the trustee with his mum being the appointor. Son when through some family law issues and separated from his wife.

in that case I believe the trust assets were safe from attack.

 

The son may have controller of the trustee, but the appointor can remove and replace the trustee. If the mother was the appointor, then she would be considered as having ultimate control of the trust, rather than her son, which is why the assets in the trust would have be safe in the family court.

 

That is exactly what happened.

 

Note that many countries (eg most countries in Europe) do not recognize the concept of trusts, so if you become resident of one of them a trust would offer no tax or legal protections, the beneficiary is the owner of the assets as treated as such.

 

I would have thought the trustee would be treated as the owner?

 

Stop trying to dodge a bullet, if you want to run around avoiding responsibility maybe AU is not much chop for you, if you stuff up, then pay up instead of making excuses.

I see people paranoid about what they do not already have, that is what I see, if you have anything and you live here, then you may win, but at what cost legal wise ?

 

Que ? said the tax inspector from the Spanish hacienda. But the money is yours... what is this "trust"... game over.
Trusts, trustees, controllers, etc... its all a BS tax evasion shelter in the eyes of many countries.

One poor sod here in Spain just got caught with a fund and 2 trusts in Switzerland worth 340,000 Euro. With penalties, interest, extra tax, etc (undeclared assets are treated as "income" for that year and taxed accordingly), he was left with a bill for 440,000 Euro, 100K more than the value of the trusts.

So Im just saying be careful with trusts when you obtain residency in another country. Myself I declared everything, I could literally lose my house in Australia if I didn't tell them about it. The United States and Spain are particularly active in tracking down hidden assets but the whole world is headed in that direction. Hiding begin some "trustee" is now much more risky, even Lionel Messi was in court today for hiding assets and may go to jail (but probably wont).

 

If trusts are not recognised then they will just look at the owner of the assets. the legal owner.

If you are saying that A owning property for B that they would consider B the owner then this is a classic trust!