Discretionary Trusts and Bankruptcy

[gearoidc]

If one of the beneficiaries of a Discretionary Trust is bankrupt, can the trustee postpone payment to that beneficiary until such time as the bankrupt has exited the bankruptcy process?

If property is put in a Discretionary Trust for a beneficiary at a time when the beneficiary is going through bankruptcy, is that property protected and can it be received by the beneficiary at a later date post-bankruptcy?

Any advice on this would be appreciated.

 

[Vanilla]

You need specialist legal and tax advice here, try a cta or step adviser

 

[Jim Stafford]

If one of the beneficiaries of a Discretionary Trust is bankrupt, can the trustee postpone payment to that beneficiary until such time as the bankrupt has exited the bankruptcy process?

If the Trust document is well drafted, then the Trustees could postpone payment until the beneficiary has exited bankruptcy.

If property is put in a Discretionary Trust for a beneficiary at a time when the beneficiary is going through bankruptcy, is that property protected and can it be received by the beneficiary at a later date post-bankruptcy?

If the Trust document is well drafted, then the property would be protected until the beneficiary has exited bankruptcy.


Jim Stafford

 

[Jim Stafford]

then the transaction setting up the trust is likely to be set aside by any creditor

You are confusing Settlors with Beneficiaries. A trust is created by a settlor, who transfers title to some or all of his or her property to a trustee, who then holds title that property in trust for the benefit of the beneficiaries. A settlor who transfers assets into a trust would be challenged if he/she was subsequently made bankrupt.

Provided the trust documents were expertly drafted, the OA would be unable to force the trustees to make a distribution to a beneficiary. You have to remember, a Discretionary Trust is exactly that: Distributions are made at the discretion of the Trustees.

Jim Stafford

 

[GabbyTheKing]

DTT should also be considered surely? IMO most circumstances would indicate that an individual subject to bankruptcy would be subject to DTT? Is there a way around that?