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Trusts and asset protection best practice
Published on 01 Feb 12 by "THE TAX SPECIALIST" JOURNAL ARTICLE
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.
