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Can you trust your Trust? Is your Trust a SHAM?

Can you trust your Trust? Is your Trust a SHAM?

Can you trust your Trust? Is your Trust a SHAM?

Riddle me this:

  • Has your Trust been created to evade legal obligations?
  • Is there a disparity between actual transactions and your Trust Deed?
  • Are you trying to mislead others in respect of your rights and obligations under the Trust Deed?

If you answered yes to any of the above questions, then I am pointing my finger at you, and telling you that your Trust looks like a sham; and your ex could soon be having a bite of that tasty looking cherry of a Trust in the Family Court!

No, don’t go try fixing the problem by making further sham transactions and drafting further sham documents either – although you think you’re being clever, for those who come by it on a regular basis, it’s totally obvious (especially when the transactions occur close to separation), and the Family Court has wide powers to reverse those transactions anyway. Just like the Family Court has power to ignore a sham Trust and treat the Trust property as though the Trust never existed; and therefore, treat the Trust property as any regular marital property. In other words, that Trust property is “up for grabs”, my friend.

What about if you have a Trust that is not a sham? What if you’re a mere beneficiary? How long is the arm of the Family Court?

It really depends on the facts of each case. However, you can be guaranteed that the Family Court will consider the following in determining whether Trust property is essentially the property of a person:

  1. the level of control/discretion that person has over the Trust property;
  2. the intention of the settlor and trustee and the range of beneficiaries;
  3. historical distributions of Trust property; and
  4. the source of Trust assets including contributions to the Trust assets.

Feeling nervous? What should you do? Get some proper legal advice. I’m not saying that Trusts aren’t a trustworthy and effective asset protection tool. They can be, if done properly.  Contact us for further information.

Navigating the Family Court
Am I or aren't I? Part 2

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Tuesday, 20 April 2021

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