Overview
A trust does not have legal personality and therefore cannot
technically be labelled 'insolvent' or as having creditors.
However, the use of 'insolvent' and 'creditors of a
trust' has become more common place in the context of trusts
particularly in instances where liabilities exceed the liquid trust
assets that the trustees have available to meet the immediate
financial liabilities of the trust.
In general terms, trustees utilise trust assets to compensate
trust creditors, as and when the debts arise. Trust assets can
include a wide range of items such as shares, cash, a discretionary
investment portfolio, real estate and highly valued art. When there
are no longer any liquid assets to use to cover the trust's
debts then inevitably the trustees must consider disposing of fixed
assets in order to satisfy the trust's debts so as to avoid
creditors seeking to commence legal action.
