Future of TDTs Post Richstar

As set out in earlier posts, and with thanks to the Television Education Network, today’s post addresses the issue of ‘Future of TDTs Post Richstar’ at the following link - http://youtu.be/fUe8aX5DghI

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

The reality is that even despite decisions such as Richstar, testamentary trusts have always been a very strong vehicle from asset protection perspective.  

They're not a recent vehicle - they go right back into early English law, over hundreds of years.  While there has undoubtedly been an amount of white noise around them in recent times, the reality is that they are by far and away the most robust structure from an asset protection perspective. 

Importantly, they also ‘tick the box’ in terms of issues such as flexibility, tax planning and overall estate and succession planning objectives can almost always be achieved via a tailored testamentary trust.  

Ultimately, despite the Richstar decision, it is absolutely the case that testamentary trusts remain the choice structure for most estate planning exercises.

Until next week.

Important considerations when establishing a TDT

As set out in earlier posts, and with thanks to the Television Education Network, today’s post addresses the issue of ‘Important considerations when establishing a TDT’ at the following link - http://youtu.be/D8HwIGVu8kk

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

Probably the two main components, although there's a myriad of things to be taken into account, but the two main components in light of Richstar would be firstly around control issues.

Particularly looking at things like who the trustee is of the trust, if there's going to be a corporate trustee, which is not unusual nowadays in relation to testamentary trusts, who will be the directors of the corporate trustee, who will be the shareholders of it, will there be  any restrictions or prohibitions on who can fulfil those roles. 

Similarly in that control context, exactly who will have ultimate control if there's going to be an appointor power?  So that would be the first main category and obviously there's a range of issues that sit around that.

The second category is exactly how regulated the trust is going to be in a mechanical sense in terms of the provisions of the will.  The particular things that advisers should be focusing on are issues like:

(a)         are there automatic disqualifications for particular roles;

(b)         if there are automatic disqualifications, do they apply permanently, or is it just during a period where a particular beneficiary or a particular appointor is in strife from creditors. 

Combining these two core components and there’s obviously a range of issues in between them, but generally as long as you can get those two broad silos right, that will set a good framework for a very strong structure. 

Until next week.

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 -  http://youtu.be/N2VpKrws93c

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.

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.

Segregating assets via multiple TDTs

As set out in earlier posts, and with thanks to the Television Education Network, today’s post addresses the issue of ‘Segregating assets via multiple TDTs’ at the following link - http://youtu.be/9_dgi85kC0s

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

TDTs or testamentary discretionary trusts have historically been considered almost immune from anything in relation to wider asset protection issues, simply because they're set up under the will of the will maker.

What we've seen over time however is that what has been a fairly traditional approach in terms of having very passive assets sit inside the trust has gradually expanded. It’s not unusual to have business run through a testamentary trust or a partnership interest through a testamentary trust. In any of those scenarios, all of the normal principles that apply to asset protection and limited liability equally apply to testamentary discretionary trusts.

As there's no extra protection provided by the testamentary trust, basic structuring issues such as utilising a corporate trustee to provide limited liability for the structure, or more importantly, ideally, using separate special purpose vehicles to undertake each uniquely risky business activity is strongly preferred.

Until next week.

What are the exceptions to the assets of a testamentary trust being protected?

As set out in earlier posts, and with thanks to the Television Education Network, today’s post addresses the issue of ‘What are the exceptions to the assets of a testamentary trust being protected?’ at the following link - http://youtu.be/BzC3jFYyWp4



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

The main exception that comes up in a practical sense is primarily for tax reasons where distributions have gone down to an at risk beneficiary out of the trust and then those amounts remain unpaid, so they become an unpaid present entitlement or they become a credit loan on the balance sheet of that trust.

In that scenario, obviously, if the at risk beneficiary gets into strife and a trustee in bankruptcy is appointed, even though the asset is ultimately inside the trust, that trust has the obligation to repay the debt and the asset effectively comes out sideways in that scenario.

There are however a myriad of other reasons that trusts can be at risk. Some of the obvious ones include where the at risk beneficiary fulfils a really important role in the trust, whether that be an individual trustee, a director of a corporate trustee, a shareholder of a corporate trustee, or perhaps most relevantly, where the at risk beneficiary fulfils the role of an appointor.

Until next week.

Verasage ‘TED’

As part of the thought leadership event facilitated by the Verasage Group in early 2011, I had the opportunity to present a 'TED' style presentation on the evolution of Australia's first virtual law firm platform which was the precursor to foundation in 2014 of View Legal.

A link to the presentation – http://www.youtube.com/watch?v=JNnnbkfXY84&feature=youtube_gdata_player

Until next week.