Asset protection and trusts – does it really work the way you think?

Do you believe that having a trust in place means the assets of the trust are protected?

In our experience, most people believe ‘by having a trust, my assets are protected.’ Contrary to public opinion, a trust’s assets aren’t necessarily protected. Asset protection, generally, comes down to control – and the degree of protection and/or risk needs to be assessed against a wide variety of considerations.

Trusts are a complex area of law and the use of trusts, when it comes to asset protection, involves a lot of different elements.

If we are advising you on trusts and commercial structuring, we will consider the following (at a minimum):

  • What risk are you looking to protect from? Family law/relationship issues? Creditors/business risk? Claims against deceased estate?
  • What are the assets of the trust? What is the risk profile of various assets?
  • What is the primary purpose of the trust? What is its true value? How have funds in and out of the trust been accounted for?
  • How does control of the trust currently work? What liability is the controller potentially subject to? What needs to be factored in from a succession point of view?
  • Who is the trust intended to benefit? How will this change over time?

If achieving asset protection is a primary objective in terms of operation of your trust, it is essential that the structuring of the trust is appropriately considered.

If you need advice about an existing trust, or are contemplating establishing a trust, please contact our Estate Planning Team on (02) 4927 2900.