How To Protect Assets With a Trust The Four Key Tips

Dominique Grubisa
Dominique Grubisa

Published 5:53 am 10 Mar 2020

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Are you interested in creating a trust to protect assets? DG Institute’s Dominique Grubisa tells you what kind of trust will really protect your assets. (Many of them don’t.)

Creating a trust to protect assets

  1. Don’t Buy into the Myth of Trusts
  2. Set Up a Vestey Trust
  3. Use the Vestey Trust to Place a Caveat on Property
  4. Leverage the Killer Combination of Documents

Can I protect my assets with a trust?

If you’re smart, that should be the first question to enter your mind when you start your career as an investor. You’ve likely heard about plenty of investors who lost out because they bought assets in their own name.

So you ask a financial advisor the above question…

And the problem is that many of them will say, “Yes.” 

When it comes to asset protection, trust structures can help. However, you can’t assume that buying via a trust offers automatic protection.

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You need to create the right type of trust to make sure that creditors can’t access your assets.

In this article, DG Institute CEO Dominique Grubisa looks at creating a trust to protect assets. These are the four tips you need to keep in mind.

Tip #1 – Don’t Buy into the Myth of Trusts

Are trust assets protected from creditors?

Several years ago, Dominique Grubisa would have told you that they are. Back then, she’d built a solid asset base, all of which she owned via trusts.

She thought she was safe. 

But in a matter of months, it all fell apart. Dominique went from wealthy to practically homeless. Worse yet, she was a lawyer who specialised in asset protection. How could she have gotten things so spectacularly wrong?

The truth is, she’d bought into the myth that trusts are ideal for asset protection. This myth is so pervasive that it’s still spread all around the internet today. Many legal and financial professionals will tell you that trusts equal protection.

But Dominique’s story shows that they don’t. And she’s also able to explain why:

“It’s a popular thing that people are told – put it in a trust and you’ll be safe. It can all be quarantined. But the law is like a hot knife through butter when it comes to that. They don’t look at who’s registered as the owner. That’s just an alias for who benefits. They look at the trust beneficiary so they go behind registered ownership.”

The great myth of trusts is that simply buying through one protects your assets. Unfortunately, traditional trusts offer no protection in the modern legal environment. Lawyers can determine who benefits from the trust and attack assets based on that.

To protect assets using a trust, you need to…

Tip #2 – Set Up a Vestey Trust

Setting up a Vestey Trust allows you to protect your assets within a trust structure.

Now, the key here is that this trust doesn’t actually own anything. In a traditional trust, the assets you buy fall under the trust’s ownership. This is what gives creditors the ability to chase your assets. They can look beyond the registered ownership to find out who benefits.

With a Vestey Trust, you’re creating something that acts as the main creditor for the asset. In other words, the trust is a friendly creditor that won’t punish you if something goes wrong. 

As part of the Master Wealth Control Intensive, we show you how to set up a Vestey Trust. The key is recognising that the trust doesn’t own anything.

It’s owed something by you.

Tip #3 – Use the Vestey Trust to Place a Caveat on Property

How can you owe anything to a trust that you’ve set up?

It all comes down to the fact that you place a Vestey Trust caveat against your investment property.

Registering a caveat on property allows the trust to register its interest in the property before anybody else. It places the trust ahead of all creditors, from lenders through to credit card companies.

This means that the trust gets paid first if you run into any issues…

However, the trust is also a friendly creditor. And using this technique, you don’t have to set an amount for the debt. The caveat can simply float there above all the other creditors, soaking up your property’s equity.

That means you can use it to ensure that no other creditors can get their hands on your assets.

Again, this is a complex process. However, it’s also completely legal, as long as you do it correctly. That brings us to our last tip.

Tip #4 – Leverage the Killer Combination of Documents

The key to making this work is to use a killer combination of legally-binding documentation. These killer documents ensure that you don’t have to pay anything to set up your asset protection.

There are six documents that you need to create:

  • Deed of Trust – This is the document that you’ll use to set up your friendly creditor. This is the person you owe money to as part of the strategy.
  • Deed of Acknowledgement – This document acts to acknowledge that you owe the debt to the trust.
  • Equitable Mortgage – This is an unregistered mortgage that you take against the property. Again, this is completely legal, especially when combined with the caveat that the trust takes out on the title.
  • Deed of Assignment – This assigns the cash the property generates to the trust.
  • Promissory Note – This is essentially a legally-binding IOU. It reinforces the fact that you owe money to the trust.
  • Caveat – You register this caveat on the title of the property for everybody to see.

It’s Time to Protect Your Assets

As you can see, it takes a lot more than simply setting up a trust to protect your assets.

You need to use a specific type of trust and ensure you have the right legal documentation for the process.

We’ve explained the basics in this article. However, using a Vestey Trust isn’t something that’s familiar to a lot of investors. You may find yourself reading the directions above and wondering how this all fits into your overarching investment strategy.

We’d like to show you much more.

In the Master Wealth Control Intensive, we dive deep into the asset protection issue. We take a close look at the things you need to do to build wealth and avoid the many myths that lead to people losing money.

To learn more about asset protection, register now for our emergency webinar briefing where you’ll learn how to safeguard your wealth while you profit safely.

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Good Debt Vs Bad Debt With Dominique Grubisa - DG Institute

Lawyer, Asset Protection Specialist and Property Educator

Dominique Grubisa is a practicing lawyer with over 25 years experience. She is a property investor and developer, an entrepreneur with businesses in Australia and Southeast Asia, a speaker, educator, writer and published author.

This column has been written for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such.

About DG Institute

Founded in 2009, DG Institute strives to empower everyday Australians to grow and protect their wealth. Our goal is to provide direction, motivation and inspiration to our clients and help them perform at their very best. We do that through our professional services, in addition to teaching them how to grow their wealth through property and business education.

This column has been written for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such.

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