{"id":521,"date":"2015-11-12T11:28:35","date_gmt":"2015-11-12T09:28:35","guid":{"rendered":"http:\/\/anthonywhatmore.co.za\/?p=521"},"modified":"2016-01-21T10:11:17","modified_gmt":"2016-01-21T08:11:17","slug":"attacking-a-trust-and-defending-it","status":"publish","type":"post","link":"https:\/\/anthonywhatmore.co.za\/index.php\/2015\/11\/12\/attacking-a-trust-and-defending-it\/","title":{"rendered":"ATTACKING A TRUST (AND DEFENDING IT)"},"content":{"rendered":"<p style=\"text-align: justify;\"><a href=\"http:\/\/anthonywhatmore.co.za\/wp-content\/uploads\/2015\/11\/defendtrust.jpg\"><img decoding=\"async\" loading=\"lazy\" class=\"alignnone size-medium wp-image-544\" src=\"http:\/\/anthonywhatmore.co.za\/wp-content\/uploads\/2015\/11\/defendtrust-300x225.jpg\" alt=\"defendtrust\" width=\"300\" height=\"225\" srcset=\"https:\/\/anthonywhatmore.co.za\/wp-content\/uploads\/2015\/11\/defendtrust-300x225.jpg 300w, https:\/\/anthonywhatmore.co.za\/wp-content\/uploads\/2015\/11\/defendtrust.jpg 500w\" sizes=\"(max-width: 300px) 100vw, 300px\" \/><\/a><\/p>\n<p style=\"text-align: justify;\"><strong><em>&#8220;Invincibility lies in the defence; the possibility of victory in the attack\u201d (Sun Tzu) \u00a0<\/em><\/strong><\/p>\n<p style=\"text-align: justify;\">It\u2019s an all-too-common scenario. \u00a0When you try to recover your money from a debtor, you find that all his\/her assets (including the luxury home, holiday house and ocean-going yacht) are held by a family or business trust.<\/p>\n<p style=\"text-align: justify;\"><strong><em>Creditors: Follow the Assets<\/em><\/strong><\/p>\n<ul>\n<li style=\"text-align: justify;\">Prevention being as always better than cure, investigate your debtor\u2019s financial position <u>before<\/u> granting credit, and take suretyships and other security from the trust and any other related entities that actually hold any of your debtor\u2019s assets.<\/li>\n<li style=\"text-align: justify;\">Look for loan accounts and unlawful dispositions. \u00a0Where assets have been transferred into a trust (or to any other third party), the transfers may be impeachable in terms of our insolvency laws. \u00a0Where the asset transfers were lawful, the trust may well still owe your debtor money for their value, whether or not appropriate loan accounts are actually shown in the trust\u2019s financial records. \u00a0Such monies may then be recovered as assets in your debtor\u2019s estate.<\/li>\n<li style=\"text-align: justify;\">Attack the trust directly. \u00a0A recent High Court judgment discusses two ways of achieving this. \u00a0Read on below.<\/li>\n<\/ul>\n<p style=\"text-align: justify;\"><strong><em>The Insolvent and the Properties <\/em><\/strong> The trustees of an insolvent estate asked the High Court to declare that two properties, one held by a family trust and one by a company, be treated as assets in the insolvent estate. \u00a0 The Court refused the application on the facts, but its analysis of the applicable law provides practical advice both to creditors (on how to attack a trust) and to the trust\u2019s trustees (on how to protect it). \u00a0 One must, held the Court, distinguish between two different lines of attack &#8211;<\/p>\n<p style=\"text-align: justify;\">1.\u00a0\u00a0\u00a0\u00a0 Firstly you can try to establish that a trust is a sham. \u00a0A trust will be a sham if factually \u201cthe requirements for the establishment of a trust were not met, or \u2026.. the appearance of having met them was in reality a dissimulation\u201d. \u00a0If it is a sham, the trust does not exist; or<\/p>\n<p style=\"text-align: justify;\">2.\u00a0\u00a0\u00a0\u00a0 If\u00a0the trust isn\u2019t a sham, it exists. \u00a0But you can still ask a court to \u201cgo behind the trust form\u201d or to \u201cpierce its veneer\u201d. If you succeed, the court will disregard \u201cthe ordinary consequences of [the trust\u2019s] existence\u201d and can for example declare trust assets to be assets in the trustee\u2019s personal estate. \u00a0\u201cIt is a remedy that will generally be given when the trust form is used in a dishonest or unconscionable manner to evade a liability, or avoid an obligation\u201d, most likely to present, said the Court, where \u201ctrustees treat the property of the trust as if it were their personal property and use the trust essentially as their alter ego \u2013 an all too frequent phenomenon in certain family and business trusts in which the trustees are both the effective controllers as well as the beneficiaries.\u201d<\/p>\n<p style=\"text-align: justify;\"><strong><em>Trustees: Defending your Trust <\/em><\/strong> Trusts can legitimately be used both as estate planning tools and to protect assets from the risks of business failure, but only if they are structured and administered correctly. So take advice upfront on how to structure the trust and its founding deed, what trustees to appoint and how to appoint them, and how to manage its affairs. \u00a0 Avoid any suspicion that the trust is a sham or that it is being used dishonestly or as an alter ego for the trustees. \u00a0In particular distinguish clearly between <u>control<\/u> of the trust\u2019s assets and \u201c<u>use and enjoyment<\/u>\u201d of them.<\/p>\n<p style=\"text-align: right;\">Source: Law Dot News &#8211; Nov 2014<\/p>\n<p><\/p>","protected":false},"excerpt":{"rendered":"<p>&#8220;Invincibility lies in the defence; the possibility of victory in the attack\u201d (Sun Tzu) \u00a0 It\u2019s an all-too-common scenario. \u00a0When you try to recover your money from a debtor, you find that all his\/her assets (including the luxury home, holiday<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[3],"tags":[14,13],"_links":{"self":[{"href":"https:\/\/anthonywhatmore.co.za\/index.php\/wp-json\/wp\/v2\/posts\/521"}],"collection":[{"href":"https:\/\/anthonywhatmore.co.za\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/anthonywhatmore.co.za\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/anthonywhatmore.co.za\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/anthonywhatmore.co.za\/index.php\/wp-json\/wp\/v2\/comments?post=521"}],"version-history":[{"count":7,"href":"https:\/\/anthonywhatmore.co.za\/index.php\/wp-json\/wp\/v2\/posts\/521\/revisions"}],"predecessor-version":[{"id":569,"href":"https:\/\/anthonywhatmore.co.za\/index.php\/wp-json\/wp\/v2\/posts\/521\/revisions\/569"}],"wp:attachment":[{"href":"https:\/\/anthonywhatmore.co.za\/index.php\/wp-json\/wp\/v2\/media?parent=521"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/anthonywhatmore.co.za\/index.php\/wp-json\/wp\/v2\/categories?post=521"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/anthonywhatmore.co.za\/index.php\/wp-json\/wp\/v2\/tags?post=521"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}