Tuesday, July 15, 2014

Is appointorship an asset?

As set out in earlier posts, and with thanks to the Television Education Network, today’s post addresses the issue of ‘Is appointorship an asset?’ If you would like a link to the video please email me.

As usual, a transcript of the presentation for those that cannot (or choose not to) view the presentation is below –

Whether the appointor role is an asset on the holder’s bankruptcy is probably one of the most contentious issues to have arisen in recent years. Certainly, the feeling amongst lawyers that act on behalf of trustees in bankruptcy or creditors is that absolutely the role is a potential asset.

If it is an asset, then it forms part of the bankrupts’ estate. The reality however when you actually look at the decisions that have been handed down is the exact opposite. So in other words, the role of an appointor is a personal role, akin to a directorship. Therefore, that’s not an asset that can be handed onto creditors.

Having said this, the issue does not seem to be going away and the conservative view would be that you would try, when setting up this type of structure, to ensure that you do one of a myriad of things.

So for example, making sure that if there is an at risk person that is needing to fulfil the role of appointor or principal, that they don’t fulfil that role individually and solely, that ideally there's some other person acting with them.

Secondly, the way in which the role is structured, it's embedded under the trust instrument, whether it be a family trust or a testamentary discretionary trust, the appointor is automatically disqualified in the event of committing an act of bankruptcy.

Until next week.