Trusts and asset protection best practice

The Tax Specialist | 1 Feb 12

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Publication date: 01 Feb 12



Discretionary trusts play a very important role in preserving wealth from financial risk, but how they work to achieve this goal is often not well understood.

This article considers the technical attributes of discretionary trusts which provide shelter in times of financial trouble. It also considers judicial intervention which might be seen to interrupt that financial isolation. The article addresses the following matters: why a discretionary trust is prima facie impervious to a trustee in bankruptcy; the claims of a retired trustee against the current trustee; the claims of trustees in bankruptcy or liquidators against income or capital distributions; the reach of the Federal Court decision in Richstar (No 6); and the power of the Family Court in the context of the decision in Kennon v Spry.

Finally, the article considers the extent to which the recently introduced trust streaming rules may impact on an otherwise useful asset protection tool.

Author profile:

Author Photo - Kenneth Schurgott CTA-Life
Kenneth Schurgott CTA-Life
Ken is a Tax and Commercial Law Director of Schurgott & Co Lawyers and Special Counsel with Brown Wright Stein Lawyers, Sydney. He has extensive experience in all aspects of tax (including State taxes and litigation), as well as business structuring, business sales and acquisitions, asset protection, succession planning and trust and estate law. Ken has been, until recently, a member of the Advisory Panel to the Board of Taxation and heavily engaged in on-going consultation in relation to the reform of the taxation of trusts and trust issues generally. He is a former President of The Tax Institute, Chairman of the International Relationships Committee of the Institute, a member of OATCA technical committee and Chairman of the policy committee of STEP Australia.
Current at 04 May 2015
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