Trusts to protect real estate in case of divorce

[TEG]

I currently own 4 properties (3 IP´s and PPOR) all in my own name.

I am concerned about protecting my assets if I get married and later divorced.

In case of divorce, can the ex-wife still get half the properties if they are setup in a trust?

i.e are trusts *guranteed* to protect the assets if setup properly? If not 100% guranteed, at least do they protect the assets more than if they were in my own name ??

Iḿ not so worried about the wife getting half the assets if the marriage lasts a long time, say > 10yrs, and kids are involved, but I definitely want to protect the assests if the marriage breaks down after a short time.

All assets were gained myself without any financial help from anybody (no inheritance), so I have a big motivitation to protect what I have worked hard for.

Many Thanks.

 

[Rixter]

My understanding is that the Family Court has the powers to get into Trusts.

Maybe you need to hitch up with a partner who has more than you

Seriously tho, maybe have a look into pre-nupts. Some say they arent worth the paper theyre written on but its better than nothing at all IF you really want to maximise efforts to protect.

 

[TEG]

Thanks Rixter.

I have considered selling all the IP´s and with the profits paying off some of the PPOR mortgage, buying a nice car (current car is 14 yr old Honda Integra), and keeping the rest of the cash in an offset to use a deposit for IP#1 with the wife once I find her!!

The problem is that I have renovated all the properties and they are all CF neutral or slightly positive CF. They are good IP´s in Sydney and I dont really want to sell (esp. as prices are starting to heat up in Sydney).

What I have is nothing compared to a lot of others..however I want to don´t want to be taken for a ride either... All my assets are in real estate.

I wonder how the really rich protect their assets ??? (i have a feeling there is no real answer and u have to take the risk (MARRIAGE).

 

[Brady]

Umm wouldn't selling the properties to have cash available to purchase an investment property with the wife defeat the whole purpose.

If they are good performing assets why not keep them and if you want a new car then use the equity and buy one

Or just keep the existing car and continue investing

 

[Rixter]

Even if you sell off your IPs to pay down PPOR a relation ship breakdown (inc marriage & defacto) can still hit you for half. In fact you will be worse of because you sold the 3 IP's and will be hit with selling costs & CGT as well.

Moral of the story, stay single or keep them - its cheaper

 

[Aaron_C]

Best way to protect is not to get married!

 

[redwing]

Life can be risky

Love can be dangerous

 

[TEG]

My understanding is that the Family Court has the powers to get into Trusts.

how about if I put the 3 IP´s in the trust (HDT or family trust)?, and keep the PPOR in my own name?

That way, in the even of divorce, the ex-wife would get 50% of the PPOR, but at least the IP´s in the trust would be protected. Would the family court still want to get access to the IPś if I was willing to give the ex wife (up to 50%) of the PPOR?

At least that way I can protect at least some of my assets (IP´s), while sacrifising 50% of the PPOR..

Does anyone know if it works this way, or would the wife´s lawyers look into getting half of everything (incl. assets inside the trust).

I used to be much more trusting in the past... would never have even thought of pre-nups, asset protection, trusts, etc.. however, now I know you can´t trust anyone.

 

[redwing]

If that wary, seek professional advice (legal), maybe have a chat with TerryW

 

[TEG]

If that wary, seek professional advice (legal), maybe have a chat with TerryW

Thanks. Yes, I think I will get in touch with TerryW.

 

[wylie]

I attended a session with a friend with a family court lawyer. She said that assets in the trust were not safe in a divorce, but that if she managed to get some of the assets in the trust, she would get less of a share in the family assets. And, of course, outcome will also depend on number of years in the marriage, work history and earning capacity of both husband and wife, ages of children etc.

But, basically, this person was told that money in a family trust can be "got at" by the family law court.

I'd be getting really good legal advice. And a prenup. Just for starters.

 

[Sheryn]

Thanks Rixter.

I have considered selling all the IP´s and with the profits paying off some of the PPOR mortgage, buying a nice car (current car is 14 yr old Honda Integra), and keeping the rest of the cash in an offset to use a deposit for IP#1 with the wife once I find her!!

The problem is that I have renovated all the properties and they are all CF neutral or slightly positive CF. They are good IP´s in Sydney and I dont really want to sell (esp. as prices are starting to heat up in Sydney).

What I have is nothing compared to a lot of others..however I want to don´t want to be taken for a ride either... All my assets are in real estate.

I wonder how the really rich protect their assets ??? (i have a feeling there is no real answer and u have to take the risk (MARRIAGE).

Teg

Your REAL assets are your knowledge, experience, skills and ability to replicate what you have already achieved. Plus I imagine your ability to save and live frugally to achieve long term goals.

Look for a future wife who has similar values to you. Plenty of people from both sexes out there that have at least their own unit.


Regards
Sheryn

 

[Terry_w]

Trust assets are not your assets but they can still be deemed to be yours and taken into account in a property settlement on the breakdown of a relationship. Divorce or defacto.

There are basically 3 ways they can be attacked:
Court making an order on the trustee
Court deeming assets of the trust to be assets of the marriage
Court deeming that the trust is a finacial resource of the marriage.

Google kennon v spry and see what happened to trust expert and barrister dr spry. He wasnt even a beneficiary of the family trust...

 

[TEG]

Teg

Your REAL assets are your knowledge, experience, skills and ability to replicate what you have already achieved. Plus I imagine your ability to save and live frugally to achieve long term goals.

Look for a future wife who has similar values to you. Plenty of people from both sexes out there that have at least their own unit.


Regards
Sheryn

Hi Sheryn,

You are absolutely right. Thanks Finding the right person based on values is probably the most important thing.

I rushed into an engagement in the past.. very beautiful girl, however looks were all that were going for her. The marriage would have lasted < 1 yr if lucky. lol. Lucky to get out of it before the marriage!! ..just made me very careful since then.. I guess you have to be really sure before you sign that piece of paper...

 

[TEG]

Trust assets are not your assets but they can still be deemed to be yours and taken into account in a property settlement on the breakdown of a relationship. Divorce or defacto.

There are basically 3 ways they can be attacked:
Court making an order on the trustee
Court deeming assets of the trust to be assets of the marriage
Court deeming that the trust is a finacial resource of the marriage.

Google kennon v spry and see what happened to trust expert and barrister dr spry. He wasnt even a beneficiary of the family trust...

Thanks Terry. I will check it out.

 

[coastymike]

Curious terry. What would happen if you held a property through a labuan trust and then divorced ? Would you have to go to labuan to sort it all out and therefore create issues for the partner making a lower settlement more attractive ? Wouldnt think the family court could enforce a labuan trust or any other offshore trust for that matter. But i know nothing about family law

 

[D.T.]

Trust assets are not your assets but they can still be deemed to be yours and taken into account in a property settlement on the breakdown of a relationship. Divorce or defacto.

There are basically 3 ways they can be attacked:
Court making an order on the trustee
Court deeming assets of the trust to be assets of the marriage
Court deeming that the trust is a finacial resource of the marriage.

Google kennon v spry and see what happened to trust expert and barrister dr spry. He wasnt even a beneficiary of the family trust...

Judging by the reading of that case, I assume new trusts could be created with the wording suggesting a spouse is a beneficiary during an intact marriage and not before nor after. Would this help TEG?

Edit - Mike, what the heck is a labuan trust?

 

[Terry_w]

Curious terry. What would happen if you held a property through a labuan trust and then divorced ? Would you have to go to labuan to sort it all out and therefore create issues for the partner making a lower settlement more attractive ? Wouldnt think the family court could enforce a labuan trust or any other offshore trust for that matter. But i know nothing about family law

Mike, What is a labuan trust?

I don't practice in Family Law per se, but if someone had an interest in a trust that was overseas the Courts here could consider it a financial resource of the person. If they have been receiving money from the trust this would show up in tax returns and/disclosure by the parties. It could therefore be taken into account and assumed that X could get money from the trust if need be.

In the Spry case Spry was ordered to make a payment to the wife - but, from memory, the trustee of the trust wasn't ordered. Spry had a choice of where to find the money - but it was determined on the basis of the trust assets.

In overseas trusts there may be cases where the value of the trust assets are not able to be ascertained. The party to the marriage may claim he is just a beneficiary and doesn't have access to the financials etc. I am not sure how this would go in court.

This reminds me of an American options trader who transferred all his assets overseas to a trust because he knew he would be facing a margin call on a bad trade. He set up the trust in one country and then the trustee of the trust then settled a new trust in a third country, both tax havens. He was ordered by the court to bring the money back, but he claimed that he couldn't as he didn't have the power - he wasn't the trustee and couldn't control the trustee. The court put him in prison until he complied - for contempt of court. He ended up staying in prison for about 3 to 5 years. Fascinating case. I am not sure if this could ever happen in Australia.

Just remember when there is a family dispute in Australia parties are required to disclose everything. You will be be asked for 15 years tax returns and bank statements etc. Failure to disclose or provide documents etc could be an offense.

 

[Terry_w]

Judging by the reading of that case, I assume new trusts could be created with the wording suggesting a spouse is a beneficiary during an intact marriage and not before nor after. Would this help TEG?

Edit - Mike, what the heck is a labuan trust?

No. because Dr Spry and his wife were not beneficiaries of the trust at all.

 

[thatbum]

I practise in family law (although admittedly not a lot of property work) and the short version is that there is no real way to structure your assets so they are "protected" from the family court. Essentially all assets are potentially on the table as part of the asset pool.

A binding financial agreement offers some protection, but obviously has its limits - and are generally becoming more and more unpopular with family lawyers anyway.

Personally, I think the best way to "protect" your financial interests is to understand how the family court actually determines a division of assets and to structure your actual relationship/marriage in a way that *might* favour you in a separation.

Or just don't get married/become de facto. Shrug.