Wednesday, July 30, 2014

Scope of the Richstar decision

As set out in earlier posts, and with thanks to the Television Education Network, today’s post addresses the issue of ‘Scope of the Richstar decision’ at the following link -

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

It’s fair to say Richstar is seen as probably the high watermark in relation to how the assets of a trust may be exposed in the context of some sort of bankruptcy litigation. Interestingly, it has remained almost as an outlier decision.

There really haven't been any decisions that have supported the landing the court reached in relation to Richstar. On top of that, the cases like Smith which have come down since Richstar, effectively completely ignore Richstar and go to the extent of saying it doesn't actually represent good law.

Ultimately, pragmatically and practically what the position seems to be is as long as a trust is structured appropriately it will provide a very good level of asset protection from creditors and should be seen as probably the choice structure in an estate planning exercise under a will - in other words, the use of a testamentary discretionary trust - in order to provide an adequate level of protection.

Until next week.