As per below, if a corporate trustee is set up, then the director(s) could be pursued? Therefore negating the purpose of asset protection? If the director was to be my wife.. Would that assist? If we have our house of residence in both our names, where there be a problem with asset protection?
If the trust has trade creditors, or has borrowed funds and is unable to meet its debts, the trustee will be pursued by the creditors of the trust to make good the shortfall. For this reason, and depending upon the proposed use of the trust, there may be some merit in using a corporate trustee. However, the director(s) of the corporate trustee may also be pursued if the assets of the corporate trustee are insufficient to satisfy creditors' claims.
For a bank to lend money to a trust, they require a personal guarentee from someone that they will repay the loan in the event of a default. Therefore, if the trust defaults on a loan, they will not pursue the trustee but rather the person who has guarenteed the loan. This is why they seek a perosnal guarentee on loans to trusts so they can recoup their money.
I am not really sure on the asset protection side of things, but you may have a problem if your family home is in joint names as if either of you are sued then you may lose it. It may be better to have the family home in your wifes same only (assuming she is not working or doing anything that may get her sued) or in your name if you are engaged in the more risky activity.
Cheers,
LukeCompanies are separate legal entities separate to shareholders and directors. Directors can only be pursued in limited circumstances. Of course if anyone provides a personal guarantee then they can be pursued in relation to that, but not other company debt.
If you have your wife as director and the company is sued and the creditors are able to come after her for some reason, then her personal assets are at risk. If your wife owns half of your house then this will be at risk. Even if you were to own the whole house then it could still be at risk, especially if she or the company is providing funds for the payment of your loan etc. It could be argued that you are trustee for her share.
You need professional advice if you are starting something risky as how you structure it now may have a great impact in years to come.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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