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by Mish Daniel | Free Information

If you’ve ever thought about protecting your assets from litigation, you might have considered opening a trust. No one wants to lose their hard-earned investments or properties. Sadly, this happens fairly often to those who have not set up adequate protection. In our latest podcast, we talk with Scott Ward, director of Hoffman Kelly Chartered Accountants. In the episode, we cover:
  • How a trust works
  • The difference between a business trust account and a personal trust
  • How tax distribution law has changed and how it may affect you
  • Creating trusts with a SMART contract and verifying them on the blockchain
  • The different structures you can use instead of a trust

Listen to the full episode here:

It’s essential to find a way to protect your assets from bankruptcy and lawsuits, and trusts can be a good way of doing this. First, however, it’s crucial to understand how trusts work before venturing into one. Revolve Commercial is the number one destination for people who want to work with a commercial real estate buying agency. We make property investment easy and hassle-free because we give our clients a priceless foundation of knowledge from which they can build their portfolio. Contact us today to find out more. 

What Is Asset Protection?

Asset protection is the process of shielding one’s assets from creditors and legal judgments. There are a variety of asset protection strategies, including using trusts, offshore accounts, and LLCs. Asset protection is essential because it can help to protect your hard-earned wealth from being seized by creditors. 

By carefully planning your asset protection strategy, you can ensure that your assets will be safe if you are ever faced with a lawsuit or other legal action. Conversely, failure to take these measures can lead to personal and business asset loss, which must be taken seriously. 

What Is A Trust?

A trust is an obligation where an individual, called the trustee, holds property on behalf of another, called the beneficiary, with the trustee being the legal owner of the trust.

The complete list of parties involved in a trust are:

  • The settlor is the person that initially sets up the trust and names the beneficiaries, trustees and appointer (if applicable).
  • The appointer can choose and appoint new trustees, although not all trusts have an appointer.
  • The trustee (or trustees) take care of the trust daily. They should always have the beneficiaries’ best interests in mind.
  • The beneficiaries are those who benefit from the income derived from the trust.

The trustee is responsible for dealing with the trust’s taxes, including registering them in the tax system, filing tax returns, and paying taxes.

Trusts are generally split between business trust accounts and personal trust accounts. There are a variety of different business trust accounts, such as:

  • Licensee trust accounts (used by real estate agents, motor dealers, resident letting agents, auctioneers, pastoral house agents, debt collectors, or process servers)
  • Public accountant trust accounts 
  • Solicitor trust accounts 

Choosing the right trust for your needs takes time and research. Be sure to contact a legal professional before doing so. At Revolve Commercial, we have worked closely with Hoffman Kelly Chartered Accountants and recommend them to our clients. 

Do Trusts Protect Assets?

Yes, trusts can protect assets. This is because trusts are not considered legal entities, unlike a person or business, and thus do not form part of a person’s general assets, meaning creditors cannot lay claim to them. Trusts are also used to manage assets for beneficiaries who are minors or have special needs. 

Trusts are particularly beneficial for people with a high risk of being sued, such as medical professionals, due to the protection the trust can provide. While we believe that trusts can be valuable tools, it’s essential to seek legal advice before making any decisions in this matter.

How To Set Up A Trust for Asset Protection

Setting up a trust requires:

  • A trustee, who may be an individual or a company 
  • A signed trust deed 
  • Assets (a minimum of $10 must be added to the trust deed)
  • Identifiable beneficiaries

A trust deed is a legal document that sets forth the duties and responsibilities of the trustee, as well as the rights of the beneficiaries. The trust deed also lists the assets held in the trust and how those assets are to be managed. It’s a crucial document ensuring the trust is governed according to the settlor’s wishes. Without a trust deed, there would be no way to ensure the trust is administered correctly.

Trust Account Audits

If you operate a trust account in any of the following professions: 

  • Real estate agents
  • Resident letting agents
  • Auctioneers
  • Chattel auctioneers
  • Motor dealers (who sell used vehicles on consignment)
  • Debt collectors (who collect debts on behalf of someone else).

Then said trust account is subject to regular annual audits, as directed by your professional body. A trust account audit period usually lasts 12 months. Within that time, you must complete two unannounced examinations, which cannot occur within two months of the end of the audition period, or within two months of one another. 

Can A Trust Protect Assets From Divorce?

Not always; it depends on how the trust was set up. The court can still include trust property in the property pool that can be claimed in a divorce proceeding. Your trust property may not be protected from a divorce if both parties have control of the trust or contributed to the trust property. Where this is not the case, the trust property is usually protected from a divorce claim. 

Who Are We?

Revolve Commercial is the go-to buyers agency for commercial property investment solutions and education in Brisbane and the Gold Coast. Everyone is different, so our approach is tailored to fit each client’s goals and knowledge base. We provide:

  • Buyer’s advocacy services
  • Specialised events
  • Innovative and original webinars
  • Tailored buyer’s solutions and programs
  • Expert-led seminars

We’re in business for you so that you can be in business for yourself. So if you’d like to find out more, contact us today.