Source: http://www.inhouselawyer.co.uk/wgd_question/to-what-extent-can-trusts-private-foundations-etc-be-used-to-shelter-assets-from-the-creditors-of-a-settlor-or-beneficiary-of-the-structure-2/
Timestamp: 2019-03-18 17:22:14
Document Index: 169312235

Matched Legal Cases: ['§19', '§19', '§19', '§19', '§19', '§19', '§19', '§22']

The law does not include specific asset protection rules. However, the following transfers are restricted (Israeli Bankruptcy Ordinance, 1980):
Transfers where the transferor became bankrupt within two years will be considered void towards the trustee of the bankruptcy procedure.
Transfers, which were made less than ten years (but more than two years) before the transferor became bankrupt will be void in respect of the trustee in the bankruptcy proceedings, unless the transferees can prove that the transferor was solvent at the time of the transfer and was able to pay its debt without regard to the transferred assets.
Transfers to certain types of trusts can shelter assets from creditors or beneficiaries. Israeli law on bankruptcy remoteness in the context of trusts is not entirely clear. Applying general rules of bankruptcy, it appears that a transfer to a trust will be protected from creditors, if it can be established that the donor ceased to control the assets in the trust and met the conditions above. Trusts that are not revocable and are controlled by disinterested trustees, can provide bankruptcy remoteness subject to the general rules of bankruptcy.
A private foundation has legal personality and could therefore, theoretically, be used to shelter assets from creditors. Since Belgium does not have its own trust law and trusts do not occur frequently in Belgian practice, it remains unclear what the position of a debtor would be if a trust would be used to shelter his assets. A lot would depend on the type of trust and the entitlements of the debtor towards (the assets of) the trust. In any case, if assets are transferred to a trust/private foundation by the debtor with the fraudulent intention to impoverish himself, a creditor who already had a claim that predates the transfer, can go to court to ask for the non-opposability of this transfer.
Trusts are not affected in any way by succession and forced heirship rules, and the Cyprus International Trust is a particularly powerful asset protection tool, for the following reasons:
Regardless of any bankruptcy or liquidation laws in Cyprus or in any other country, whether the trust is voluntary and without consideration, or made for the benefit of the settlor or his family members, the trust is not void or voidable. This is the case unless it is proved to the court that the trust was made with intent to defraud persons who were creditors of the settlor at the time when the payment or transfer of assets was made to the trust. The burden of proof of the settlor's intent to defraud lies with the person who is seeking to annul the transfer.
Any action for avoidance of the trust must have begun within two years from the date of transfer or disposal of the assets to the trust.
The Charitable Uses Act 1601 (also known as the Statute of Elizabeth), which invalidates arrangements made to hide assets from future creditors, is expressly excluded in Cyprus.
The Amending Law of 2012 strengthens these defences by explicitly providing that any question relating to the validity or administration of an international trust or a disposition to an international trust will be determined by the laws of Cyprus without reference to the law of any other jurisdiction. It also makes clear that the powers and duties of the trustees and of any protectors of the trusts are governed exclusively by Cyprus law.
Furthermore, it provides that dispositions to a trust cannot be challenged on the grounds that they are inconsistent with the laws of another jurisdiction, for example regarding family and succession issues, or on the grounds that the other jurisdiction does not recognise the concept of trusts.
In compliance with the relevant deadlines under insolvency law, the dedication of assets to a private foundation can be withdrawn from the creditors of the founder. If the founder has no rights in the private foundation beyond those provided by the law there is no possibility of access of a creditor against the private foundation due to the founder’s lag of property rights. By law the founder does not have any rights to assets and rights of organisation with access to assets.
As legal entitles private benefit foundations may be used to shelter assets from creditors. However, any transfer of property made to impede a creditor or to put a property out of such creditor’s reach and which is therefore harmful to the creditor can be challenged in court at which point the corporate veil could be pierced.
These foreign structures could be used to shelter assets from creditors. However and according to the particular circumstances around the set up of the given structure, creditors could eventually encourage a legal action either under Section 333 CCC (acción de simulación) or under Section 338 CCC (acción de fraude). Both actions constitute a measure of patrimony integration due to the fact that if the court issues a ruling favorable to the creditor those acts by which the structure has been set up will be regarded void and consequently those assets held in structure would be treated as if they had never left the patrimony of the involved party (Sections 334 and 390 of the CCCN).
24.1	If a beneficiary (§19.2) has a fixed entitlement under a trust (§19.2), an English court generally has power to make an order for the payment of the income from the trust to be directed to a creditor of the beneficiary.
24.2	However, where a potential beneficiary (§19.2) of a discretionary trust (§19.3) has no legal right to the trust assets, an English court will not, generally, order payment of trust funds to a creditor of that beneficiary. However, the English court has power to set aside a transaction by which assets were transferred into trust with the intention of defeating the claims of potential creditors.
24.3	However, the assets of any trust (§19.2) may be regarded by an English court as a financial resource of a beneficiary (§19.2) or potential beneficiary in reckoning his liability to make payments in divorce or child maintenance proceedings, and to satisfy claims in such proceedings the English court has wide powers to make orders against the trustees (§19.2) of, in relation to the assets of, such a trust.
The Fraudulent Dispositions Law (1996 Revision) provides that every disposition made at an undervalue with the intention to defraud a creditor can be rendered voidable at the request of a creditor prejudiced by that disposition. However, even if it can be shown that a disposition made at an undervalue (such as a disposition to a trust) was made with an intent to wilfully defraud creditors, the disposition is only set aside to the extent necessary to satisfy the creditors prejudiced by the disposition. The statute specifically provides that the burden of proof of the transferor's intent to defraud is placed squarely on the creditor seeking to set aside the disposition.
If a trust is properly constituted, assets of the trust are generally regarded as belonging to the trust and sheltered from claims by creditors of the settlor. This is because the settlor no longer has any interest in the trust assets. However, where the settlor has extensive reserved powers under the trust, such said powers could render the trust vulnerable to attacks by creditors.
For a beneficiary with a fixed interest in the trust, his / her share may be vulnerable to attacks by his / her creditors as his / her beneficial interest is regarded as his / her property from the trust's inception. A discretionary beneficiary, on the other hand, is not generally regarded as having legal ownership in assets of the trust – an attack mounted by his / her creditors would be less likely to succeed.
However, the courts have powers to, among others, set aside –
any conveyance of property into a trust made with the intent to defraud creditors; and
any disposition of property made with the object of reducing the amount of maintenance payable or depriving the spouse of rights to the property.
Private foundations are not available as a wealth planning tool under Singapore law as the foundations are a civil law concept.
In general, possible Portuguese structures are based on the separate legal entity status. However, several exceptions to separate legal entity status exist in the Portuguese legislation, namely if the structure constitution is deemed to aim at avoiding creditors.
Trusts and private foundations can be used to shelter assets from the creditors of a settlor or beneficiary of the structure with caveat already explained before (§22.).