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Asset Protection
In an increasingly litigious business environment, many of our clients are concerned from time to time about the protection of their assets. Typically they want to ensure that:
- their personal and business assets are protected for future generations;
- their assets are protected from attack from their creditors, bankruptcy or divorce;
- the assets they pass to their children are protected from creditors, bankruptcy or divorce of their children.
The highest level of asset protection that can be provided to a client is to own assets in a fully discretionary trust. This is because the courts have long recognised that a beneficiary of a purely discretionary trust does not have a defined or contingent interest in any of the discretionary trust's assets - even though that beneficiary may control the trust. Therefore, if a beneficiary is attacked by creditors, becomes bankrupt or is divorced, the trust assets will not be at risk.
Cleary Hoare have further enhanced the asset protection values of a discretionary trust, to develop a Bloodline™ Trust. The essential features of a Bloodline™ Trust are:
- it is a fully discretionary trust;
- the rules of the Bloodline™ Trust categorically provide that the capital (assets) of the trust can never go outside the bloodline during the life of the trust;
- it allows income to be spread amongst in-laws, eg children-in-law, grandchildren-in-law, but the rules very strictly provide that capital must stay within the bloodline.
If the transfer of assets to a discretionary trust becomes too costly due to Capital Gains Tax or stamp duty liabilities, a Contractual Will or a Secured Debt Strategy can provide similar asset protection.