Discretionary trusts are very good in terms of asset protection, even if there is just 1 person behind them and this person is the only beneficiary to ever receive a distribution. See the 2008 case of Smith v Public Trustee NSWSC for an example.
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Discretionary trusts are very good in terms of asset protection, even if there is just 1 person behind them and this person is the only beneficiary to ever receive a distribution. See the 2008 case of Smith v Public Trustee NSWSC for an example.
I would say that the case of Richstar Enterprises Pty Ltd v Carey (No 6) [2006] meant that the once solid protection offered by discretionary trusts has now been shattered. Judges tend to recognise the creation of trusts as a means to thwart creditors and litigators.
Not at all. This was an injunction involving corporations act offenses. Totally different to an individual going bankrupt. Smith v PT was after this case and the richstar argument was brought up unsuccessfully.
Having a little knowledge can be a dangerous thing.
It is like a non medically trained person saying I have heard that a brain tumour can result in pain in the head, so I will not take this panadol for my headache in case it is a brain tumour!
My understanding of Smith vs PT is that Smith finally established that the trustee of the discretionary trust did in fact control the trust and therefore, Smith as the named beneficiary of the trustee deserved the property left by the original trustee. Hence, the discretionary trust provided protection from the public trustee.
Nope.
From my hazy memory bank:
Smith was left a property via the will of a Dr. Problems because the doctor didn't actually own the property. It was owned by a trustee company for a discretionary trust set up by the Dr many years before she died. The Dr was sole director and shareholder of the company and appointor of the trust and also the only beneficiary ever to benefit from the trust.
Smith argued that there was no trust, and if there was it was really Dr's alter ego and therefore the property was owned by Dr. Smith used the Richstar case as a precedent for this.
The ruling was that the trust was in existance, it was the trustee that owned the property and that it couldn't go to Smith as the Dr didn't own it and couldn't pass it via her will.
incidently, the public trustee was involved because Dr did not have a back up appointor and control of the trust fell to the executor of her will.
