Page 3 - FWP Wealth Adviser Newsletter - May 2025

ISSUE 111
MAY 2025

Limitations and Legal Realities As Firstlinks points out:
Despite these efforts, no structure is immune from court “There is a tension between asset protection and the
scrutiny. As Firstlinks cautions: Court’s obligation to achieve a just and equitable outcome”
“No structure is completely safe from the reach of (Firstlinks, 2024).
the Family Court, but careful planning can reduce risks” This tension is not merely legal-it is deeply philosoph-
(Firstlinks, 2024). ical. Should the law allow one party to walk away from a
The effectiveness of asset protection strategies depends relationship with the lion’s share of assets simply because
on the facts: they were held in trust? Or should the court pierce the veil of
• Independent Trustees: Having a truly independent trust- legal structures to ensure fairness?
ee (not a family member or close associate) can help, but
courts may still look at who influences decisions behind The Adviser’s Ethical Responsibilities
the scenes. Financial advisers, lawyers, and accountants play a
• Timing and Purpose: Trusts established long before a crucial role in helping families navigate these issues. Their
relationship, with clear evidence of separate administra- responsibility is not only to provide technical advice, but
tion, are more likely to be respected as independent. also to help clients understand the limits of asset protection
• Binding Financial Agreements: BFAs can provide sig- and the importance of ethical conduct.
nificant protection, but they must be Movement Legal emphasises:
properly drafted, with full disclosure and “Advisers must be honest with clients
independent legal advice for both parties. Resilience in wealth about the limits of asset protection and the
Courts can set aside BFAs that are unfair management means likelihood of court intervention” (Movement
or entered into under duress. Legal, 2023).
As Osborn Law observes: more than just Advisers should encourage clients to
“Recent cases have shown that even protecting assets. plan for uncertainty, to be transparent with
well-drafted trusts can be vulnerable if the It means building their partners, and to consider the long-term
Court finds evidence of de facto control” structures that can implications of their decisions-not just for
(Osborn Law, 2023). themselves, but for their families and future
adapt to changing generations.
Practical Advice circumstances,
• Review Trust Structures Regularly: Cir- fostering open Building Resilience
cumstances change-so should your trust communication Resilience in wealth management means
arrangements. within families, and more than just protecting assets. It means
• Document Everything: Keep clear records building structures that can adapt to chang-
of trust decisions and distributions. preparing for both ing circumstances, fostering open communi-
• Seek Professional Advice: Engage experi- prosperity and crisis. cation within families, and preparing for both
enced legal and financial advisers who un- prosperity and crisis. As philosopher Martha
derstand both the technical and practical Nussbaum argues, “Resilience is not the
aspects of family law and trusts. absence of vulnerability, but the capacity to
As academic commentary notes, “Asset protection is not recover and adapt in the face of adversity” (Nussbaum, 2011).
about hiding assets, but about legitimate structuring and
transparency” (Evans, 2021, UNSW Law Journal). Conclusion: Navigating the Future – Practical
Takeaways and Resilient Wealth Management
Philosophical and Ethical Dimensions: Fairness, The intersection of family trusts and relationship break-
Resilience, and the Adviser’s Role downs is fraught with complexity-but also opportunity. By
The Tension Between Protection and Fairness understanding how courts approach trusts, recognising the
The use of trusts to shield assets from former partners limits of asset protection strategies, and embracing ethical
raises important ethical and philosophical questions. On and resilient wealth management, families and advisers can
one hand, families have a legitimate interest in protecting navigate these challenges with greater confidence.
intergenerational wealth and ensuring that assets are
managed according to their wishes. On the other, the Family Key Takeaways:
Court’s mandate is to ensure that property settlements are • Legal Reality Trumps Legal Form: Courts will look at
fair and equitable, taking into account the contributions and who truly controls and benefits from trust assets, not just
needs of both parties. what the paperwork says.

3