Our family trust has become the subject of a dispute in bankruptcy proceedings. One of our investment properties in Queensland was largely paid for by my husband who is the trustee of our family trust. He paid the deposit, the mortgage is in his name and he makes all the payments on the loan. Is it possible that this property could be used in the bankruptcy proceedings?
Lawyer Answers (1): Answers from lawyers are general preliminary responses. They are not formal legal advice and cannot taken account of all your circumstances. They do not create a lawyer–client relationship.
Answer by LegalEagle™ staff, Melbourne 3000 VIC
- Sometimes in bankruptcy proceedings the Court might find that the trust was actually just a sham (fake) way of protecting assets from creditors in the event of bankruptcy proceedings.
- Generally in a discretionary trust the beneficiaries don't legally own the trust property which takes it beyond the reach of creditors in bankruptcy.
- However in this case it looks like the property might actually be considered the property of your husband rather than trust property. The court might order that there is a resulting trust in favour of your husband and declare it to be his legal property making it available to creditors.
- There are many more details that need to be evaluated before this could be certain. It is advisable to discuss these with a legal practitioner.