Life is full of unexpected twists and turns, which makes it important to protect all you have from financial attack.
Relationship bust ups are just one problem area where a protective trust can help.
Two years after losing her husband Peter to cancer, Ellen started dating her childhood sweetheart from high school, Simon.
Simon was divorced and had two teenage sons.
They clicked, the families clicked, and after years Simon proposed, and soon he and his sons moved in with Ellen and her two daughters into her home.
Simon was a self employed builder and unfortunately a few years later he got into financial difficulties over a property development.
After 18 months of fighting over money and the children, Ellen left Simon and filed for what became an acrimonious divorce.
Over the 12 months of the divorce proceedings Simon filed for bankruptcy and Ellen was dismayed to discover that some “bank paperwork” she signed years earlier meant that her home was mortgaged and with Simon bankrupt she was now more than $300,000 in debt.
This was made all the more heart breaking by the fact that Ellen’s late husband Peter’s government super and life insurance had paid for most of the family’s home.
Ultimately Ellen was forced to sell the home and moved the family to a cheaper neighbourhood and the girls had to change schools, something that Ellen felt terrible about.
How could this happen and what could have been done to protect Ellen and her children?
Divorce is, at best, a dangerous and unpredictable path.
The judge is required by law to consider the financial needs of Simon as well as Ellen.
Ellen had co-signed paperwork and was considered to be a partner in the business.
Ellen had no appetite for the fight and Simon hired very aggressive lawyers.
All the good will and promises early in the relationship amount to very little when things turn unpleasant.
A Protective Trust
A Protective Trust is designed to protect the assets or beneficiaries of the trust from external attack – sometimes self inflicted! – such as divorce or bankruptcy.
Testamentary Trusts with restrictions on who can access capital are by definition protective and can be established easily by a competent estate planning lawyer.
Had Ellen and Peter sought good advice early on in his illness then the financial outcome for the family could have been very different.
What If I Have No Children?
As soon as we have people we love and assets to share with them then this type of trust makes sense.
Virtually everybody that has worked for a few months has, at the very least, superannuation and life insurance which can amount to hundreds of thousands of dollars.
So many young women end up living with their partner with no will in place.
They expose their parents to the possibility of dealing with a messy estate or even an estate dispute if something goes wrong.
There is great peace of mind in knowing that your family won’t have a fight on their hands if the worst happens.