For over 18 years I have been predicting that the courts would seek to wield some control over the Family Trust if you go bankrupt. To date this has never happened except in the Family Court. I have been predicting that the controller or "Appointor" (as the trust deeds call them) would one day be under threat.
Well yesterday it happened. According to page 3 of today's Financial Review (29 June 2006):
"...receivers can be appointed to trusts over which directors of the failed ... group have effective control."
"The [court] ruling may have wider ramifications for insolvency cases. Similar rulings have been made in the Family Court but this is the first time the principle has been applied in the commercial context."
Well there you have it. For most modern trusts 100% of the power is with the Appointor. (There is generally no power with the Trustee who is just a puppet.) Therefore, if you follow a "man of straw and woman of substance" asset protection philosophy then the wife should be the Appointor and the husband (or a company he is sole director of) should be the trustee.
Many men fear their wives being the Appointor - which is basically a god position. OK stay as Appointor. But at the very least you should ensure that you have a clause that states that in the event of potential bankruptcy you lose the position of Appointor to your wife (or another trusted person).
