Family Trusts

[paradox]

By my inexpert understanding only...


Yes, I believe all trust assets could be susceptible. That's why many people limit the value of assets in any one trust, using multiple trusts for more assets.

Thanks GP for the reply. That has been my suspicion all this time. Yet it appears that most posts on the forum are more concerned about protecting any PPOR or IP in personal name but not as worried about having numerous IP within a trust. I often see lots of worry regarding one single PPOR and yet when the trust/trustee company is sued, ALL the properties within the trust are susceptable!

I wonder if cross-secruitisation amongst multiple trusts would be a viable option.

 

[JamesGG]

Hi all,

The assets in a trust cannot be taken by someone who sues the trustee company, if you sack the trustee on hearing of the lawsuit.

The trustee company then has just $2 to its name, which is hardly worth suing for.

You cannot sue the actual trust itself.

My understanding is also that the other problem with a personal trustee is that if the appointer, trustee and beneficiary are all the same person, the trust is effectively dissolved.

 

[paradox]

Hi James! Good to see ya here too.
(albeit a bit embarrassed)

I am still a bit confused regarding how liable the trust/trustee is when sued by say a tenant.

As posted by NigelW in an earlier post:
"2) In your position as a landlord, if someone is injured in connection with one of your properties then they may sue the landlord. BUT WHO IS THE LANDLORD? NOT YOU PERSONALLY, EITHER YOU AS TRUSTEE OF THE TRUST OR A COMPANY WHICH YOU CONTROL AS TRUSTEE OF THE TRUST. So (absent any breach of directors' duties under the Corps Act - which would be pretty unlikely) your personal assets and personal credit history etc is in the clear and only the assets of your trustee company in its own name (probably $2) and those held within that trust are at risk. This is one reason not to have all your eggs in one trust basket. (The trust assets will be at risk due to the trustee's right of indemnity out of the trust assets. Whilst this can be negatived in the trust deed itself, it will cause financing difficulties..."

In my layperson sort of thinking: After all the Trustee company is looking after the properties on behalf of the trust, so in the event of a litigation, even if we sack the trustee company, shouldn't the trust still be liable to pay out the claim with the assets owned even if we have appointed a new trustee?

Kwan

 

[JamesGG]

Hi Kwan,

As the trustee is looking after the trust's affairs, it is the trustee who is responsible for any legal claims. As I said, you cannot sue the actual trust, so the trustee is the entity that is responsible.

The trustee does not, however, have any right to the assets held by the trust, and so is essentially worth zero. (Well, $2 in most instances, but, still hardly worth suing for.)

And look at it this way: what is the point of having a trust if it is no good for asset protection???

Enjoy

James.

 

[GreatPig]

James,

The trustee does not, however, have any right to the assets held by the trust

I believe that is generally incorrect in the case of the trustee being sued in his role as trustee.

See Nigel's comments in this thread.

Cheers,
GP

 

[JamesGG]

Hi,

Thanks for that. I stand duly corrected.

Cheers

James.