Ryan and Simone’s Family Trust – The Pitfalls of Personal Trusteeship
The Situation:
Ryan was the personal trustee of a family trust that held significant assets including the family business, house, share in an investment property, cars, and a caravan. The trust, through the business, owed over $400,000 to the ATO.
The Challenges:
- Significant ATO debt that the trust couldn’t repay
- Ryan’s personal liability for trust debts as a personal trustee
- Need to restructure the business and protect family assets
LemonAide’s Approach:
- Assessed the overall structure of the family trust and its assets
- Restructured the business into a separate company
- Facilitated the sale of other trust assets to Simone at fair market value
- Guided Ryan through the personal bankruptcy process
Educated the clients on the implications of personal trusteeship
The Outcome:
- Business successfully restructured into a separate company
- Trust assets sold to Simone, protecting them from creditors
- Ryan entered bankruptcy to deal with personal liability from trust debts
- Preserved family assets despite the trust’s financial difficulties
Key Takeaways:
- Personal trusteeship can lead to personal liability for trust debts which may result in bankruptcy if not paid.
- Proper structuring with a corporate trustee can provide better asset protection
- Restructuring and asset sales can help preserve family wealth in financial difficulties
- Professional advice is crucial when dealing with complex trust structures
Concerned about your trust structure?
