Discretionary Trusts (often referred to as family trusts because
they are typically used to distribute income amongst family
members) are probably the most widely used type of trust
An appropriately implemented Discretionary Trust promotes:
Asset protection benefits
Estate and succession planning benefits
A common and sensible objective for anyone making a Will is to
ensure that each beneficiary's inheritance is protected and
Waste and dissipation of the assets by the beneficiary
Claims on the beneficiary's assets due to marital or
Discretionary Trusts are being used more and more in estate
planning to protect inherited wealth by the incorporation of
'Testamentary Trusts' in a person's Will.
It is a misconception that "The best estate plan is to own
nothing but have access to everything." The reason is that
progressive changes in family and bankruptcy law, and the wide
reaching power of the Family Court to dismantle trusts and bind
third parties such as trustees, means that the protection offered
by a Discretionary Trust (whether it be created 'inter
vivos', that is, during a person's lifetime or in a Will as
a Testamentary Trust) is not absolute.
The primary reasons for the creation of Discretionary Trusts are
to enable the primary asset holder to distance himself or herself
from legal ownership of either capital (for risk management
purposes) or income (for tax purposes). Recent case law suggests
that if a person controls a Discretionary Trust - in the sense that
they have unfettered power to appoint a trustee and/or distribute,
irrespective of whether to themselves or others as beneficiaries,
these reasons are negated because courts can regard that power as
giving the controller the very property rights the discretionary
trust was set up to negate.
So do we abandon this age old planning tool? I do not believe we
should as discretionary trusts continue to be an effective form of
asset protection if appropriately implemented.
Sect.117 can deal with false statements and knowingly making false allegations of violence could justify a costs order.
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