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  • #977975
    hmirz
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    G’day – we all know there is no one-size fits all approach to the best way to protect your assets. It all very much depends on your individual circumstances.

    That said, I often make the following points to clients:

    1. The best structure through which to obtain asset protection strategies is still the discretionary trust (note super funds are probably better, but there are limitations on amounts accumulated in a fund).

    2. Just because you use a discretionary trust does not mean you limit the use of companies – trusts can own shares in companies.

    3. A number of trusts might be appropriate to achieve optimal asset protection.

    4. The trustee/s and the appointor are the two most important roles in controlling a trust.

    5. The trustee might be an individual, multiple individuals or a company controlled by one or more individuals.

    6. Even though the trustee manages the trust, the trustee does not have unfettered power. Indeed the trustee must act in the interests of the beneficiaries. Nevertheless, the trust deed is paramount and shouldn’t be drafted so as to unnecessarily stifle the trustee.

    7. Of course, the trustee is subject to a number of duties under the law of trusts:

    (a) The trustee can’t deal with trust property for own benefit;
    (b) The trustee must be able to provide accounts and other info to beneficiaries when requested
    (c) The trustee must properly invest the trust funds
    (d) The trustee has to act impartially between the beneficiaries

    8. It is the appointor who controls who will be the trustee of the trust. Generally, the appointor is some arm’s length person who can be trusted to act in the best interests of all.

    Cheers,
    Hamid Mirza
    Barrister-at-Law, Mediator & Registered Migration Agent
    http://www.abclegal.com.au
    [email protected]

    #1103853
    JaneB
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    This is very interesting.

    What are the big mistakes that people make in drawing up discretionary trusts?

    There seem to be a lot of people who regret trying to protect assets that way.

    #1103854
    hmirz
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    Thanks Jane.

    You are quite correct and this indeed is a valid concern to practitioners like me. I see many errors being made and most stem from the fact that discretionary trust deeds are drafted poorly, do not take into account the possible equity and trust law issues and are calibrated more towards securing tax benefits (surprisingly though, many of the discretionary trust deeds fail in this respect also!) rather than crystal ball gazing for future asset protection.

    A good and robust family discretionary trust deed will secure a whole host of benefits, not just income tax benefits say at the expense of asset protection! It’s one of those areas where adopting a careful, considered and holistic approach reaps dividends in the future. Drafted correctly, family discretionary trust deeds can work wonders.

    Cheers,
    Hamid Mirza
    Barrister-at-Law, Mediator & Registered Migration Agent
    [email protected]
    http://www.abclegal.com.au

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