Home – New Forums New here? Share your story Trusts and asset protection for your business

  • This topic is empty.
Viewing 11 posts - 1 through 11 (of 11 total)
  • Author
    Posts
  • #979425
    Mark Jeffreson
    Member
    • Total posts: 36
    Up
    0
    ::

    A recent decision in the Family Court has highlighted the usefulness of the traditional discretionary trust as an effective tool for the protection of assets that might otherwise be exposed to claims against an individual.

    In Moreton & Moreton [2012] FamCA 30 it was held that the husband’s alleged interests in a discretionary family trust and one of its corporate beneficiaries, commonly referred to as a “bucket company”, were not to be included in the matrimonial pool of assets for division. By way of background, the bucket company was 100% owned by the trust from which it received its distributions, and its sole director was the husband’s brother.

    The trust had a broad range of potential beneficiaries including the husband, the wife and the bucket company. The trustee of the trust (who generally has executive authority to distribute the income and assets of the trust) was another company, which had ownership and directorship equally held between the husband and his brother. The appointors of the trust, who have the power to appoint and remove the trustee, were the husband and his brother jointly.

    The wife unsuccessfully argued that the husband had control of the trust for these purposes, and it was decided in the alternative that the facts (including the history of activity of the trust) lent themselves to indicate a bona fide trust existed and there was no alter ego of the husband present. This was contrasted with the circumstances in Kennon v Spry [2008] HCA 56 where it was held the husband effectively controlled a trust in relation to which he was the appointor and trustee, and (curiously) a former beneficiary prior to his own removal as such.

    The implications for asset protection from these cases are important. It is clear from the above that in the context of matrimonial property settlement, if an outsider to the relationship can be found to have equal influence or legal ability to control the assets of a discretionary trust as against either or both spouses acting on their own or together, then those assets are excluded from the matrimonial pool.

    It should not be read into this that where a husband and wife are found to have equal control over the assets of a trust in their capacities as appointors or trustees, that this would exclude those assets from the matrimonial pool on the basis neither spouse has absolute control individually.

    There may be similar implications from this case for the protection of assets against the claims of business suppliers or financiers on an individual associated with a trust as:

    • an appointor (singly or jointly);
    • an individual trustee (singly or jointly);
    • a shareholder of a company that is a trustee; and
    • a director of a company that is a trustee.

    In considering the above for asset protection planning it would be advisable to also consider the intended operation of a trust, as the history it leaves behind may serve as a telling indicator of who really controls a trust and its assets. Care should also be taken when selecting an “outsider” to share control with when dealing with assets you wish to retain, as it may be just as likely as your spouse or a creditor that they turn hostile!

    Mark Jeffreson
    Partner

    A member of UHY International, a network of independent accounting and consulting firms.
    Liability is limited by a scheme approved under Professional Standards Legislation.

    25 Peel Street
    ADELAIDE SA 5000
    Telephone +61 8 8110 0999
    Fax +61 8 8110 0900
    http://www.uhyhn.com

    #1114207
    Divert To Mobile
    Member
    • Total posts: 2,751
    Up
    0
    ::

    Hi and welcome to the forum.

    Perhaps you could answer this for me.
    How do you do that in NSW. Land titles office does not allow a trust to own a property.

    Steve

    #1114208
    Mark Jeffreson
    Member
    • Total posts: 36
    Up
    0
    ::

    Hi Steve, and thanks.

    First I’ve heard of that! Let me check and get back to you tomorrow.

    Mark

    #1114209
    victorng
    Member
    • Total posts: 626
    Up
    0
    ::
    Divert To Mobile, post: 127931 wrote:
    Hi and welcome to the forum.

    Perhaps you could answer this for me.
    How do you do that in NSW. Land titles office does not allow a trust to own a property.

    Steve

    A few points of clarification, assuming you’re referring to real property (if trusts couldn’t own any property there wouldn’t be much point to trusts …)

    Trusts can own real property. But the fact that land is held on trust isn’t registered on title. You can / should? lodge a separate declaration of trust in relation to the property.

    Cheers,
    Victor

    ^ this isn’t legal advice … not my area of law anyway

    #1114210
    Claire Naidu Lawyer
    Member
    • Total posts: 4
    Up
    0
    ::

    Hi Mark,

    Thanks for your thread.

    Trusts in family law matters are always tricky and there is no definitive answer that trusts will or will not be included in the matrimonial pool. Each trust will be considered on a case by case basis. Quality advice is extremely important to take the necessary steps to protect the trust, assets of the trust and the beneficiaries.

    Claire Naidu
    http://www.clairenaidu.com.au

    #1114211
    Divert To Mobile
    Member
    • Total posts: 2,751
    Up
    0
    ::
    victorng, post: 127949 wrote:
    A few points of clarification, assuming you’re referring to real property (if trusts couldn’t own any property there wouldn’t be much point to trusts …)

    Trusts can own real property. But the fact that land is held on trust isn’t registered on title. You can / should? lodge a separate declaration of trust in relation to the property.

    Cheers,
    Victor

    ^ this isn’t legal advice … not my area of law anyway

    How do you call that clarification?

    Steve

    #1114212
    victorng
    Member
    • Total posts: 626
    Up
    0
    ::
    Divert To Mobile, post: 127993 wrote:
    How do you call that clarification?

    Steve
    Steve,

    Maybe you can understand this.

    • Trusts can own property.
    • Trusts can own real property (i.e. land) in NSW, Victoria etc.
    • The trustee is recorded on the title as the owner – the title will not refer to the trust (ie. it will not say ‘XYZ atf The ABC trust‘)
    • A declaration of trust can be lodged with the titles office that notes the property is held on trust

    If you still can’t understand any of this then maybe you don’t have enough of a basic understanding of trusts or property. You certainly don’t seem to have a basic understanding of manners.

    #1114213
    Mark Jeffreson
    Member
    • Total posts: 36
    Up
    0
    ::

    Steve

    Perhaps I can explain further. I’m not a lawyer, but here goes:

    Trusts are a bit complicated. They can’t act or do anything in their own right, unlike an individual or a company. It is their trustees that act on their behalf.

    When it comes to putting assets into a trust, such as land, bank accounts, plant & equipment, motor vehicles and anything else it is to own (including business assets), they must be registered in the name of the trustee in that capacity.

    For example, if the trust is known as ABC Trust, and its trustee is acompany called XYZ Pty Ltd, the trust investments would be registered in the name of “XYZ Pty Ltd as trustee for ABC Trust”. I think what Victor is saying is that the Land Titles Office in NSW won’t accept that naming convention on land title deeds, but instead require land owned by a trust to be registered in the name of the trustee only (eg “XYZ Pty Ltd”) with a separate document filed at he LTO that states that the titleholder (XYZ Pty Ltd) holds that title specifically on behalf of the trust (ABC Trust).

    Clear as mud? Like I said, it’s complicated but red-tape aside it seems there is no other impediment to a trust owning land in NSW.

    Cheers
    Mark

    #1114214
    Divert To Mobile
    Member
    • Total posts: 2,751
    Up
    0
    ::
    victorng, post: 127996 wrote:
    Steve,

    Maybe you can understand this.

    • Trusts can own property.
    • Trusts can own real property (i.e. land) in NSW, Victoria etc.
    • The trustee is recorded on the title as the owner – the title will not refer to the trust (ie. it will not say ‘XYZ atf The ABC trust‘)
    • A declaration of trust can be lodged with the titles office that notes the property is held on trust

    If you still can’t understand any of this then maybe you don’t have enough of a basic understanding of trusts or property. You certainly don’t seem to have a basic understanding of manners.

    My intention was not to offend you.

    So if you want to change the trustees you would also need to change the names on the title, if so is stamp duty payable again?

    Steve

    #1114215
    Mark Jeffreson
    Member
    • Total posts: 36
    Up
    0
    ::

    Steve

    Yes you would need to change the name of the titleholder if the trust were to change trustees, however stamp duty should not be payable as there would be no change in beneficial ownership. That is, the same trust would still own the asset…only its nominee would have changed.

    Cheers
    Mark

    #1114216
    Divert To Mobile
    Member
    • Total posts: 2,751
    Up
    0
    ::

    Thanks Mark,

    Steve

Viewing 11 posts - 1 through 11 (of 11 total)
  • You must be logged in to reply to this topic.