In essence asset protection involves taking steps to protect your personal and business assets from or against potential risks.
A lot of people don’t think of doing anything about asset protection until they are in the midst of a legal battle or have fallen behind financially and are at risk of losing their assets. By then it is often much too late to do anything effective. Asset protection works best when you are proactive and plan ahead.
We encourage people to think of asset protection as a kind of insurance – hopefully you won’t ever need it, but it will bring you peace of mind if you do. Also try and think of asset protection before you acquire your assets, as capital gains tax and stamp duty can often cause expensive problems if you rearrange your assets after you have acquired them.
There are many prudent and practical things you can do to protect your assets against future financial setbacks such as business failure, insolvency, relationship breakdown and litigation.
Consider the following to assist you in protecting your hard earned assets:
Separately held assets
It can be a good idea, if you are married or in a de facto relationship, for the assets to be held in the name of the lower risk partner. This means that if the high risk partner loses everything, the assets held in the name of the lower risk partner stay protected. This can provide some protection if the high risk partner goes bankrupt or is sued. Of course, the success of this strategy is dependent on the relationship with the lower risk partner remaining intact.
It is possible for persons who are married or in a de facto relationship to agree how their assets will be dealt with in the event of separation. By doing so they can avoid unexpected consequences in the event their relationship comes to an end.
Use of trusts
A trust is, very simply, a structure where a person or entity (known as the trustee) holds an asset on behalf of another person or entity (known as the beneficiary). Discretionary (family) trusts are very helpful in asset protection, because the beneficiaries of the trust do not legally own or have an interest in the trust property, and any distribution to them of the trust property by the trustee is solely at the trustee’s discretion. This means that a creditor can’t get at the trust property if they are going after a beneficiary.
Use of Companies
A company is a separate legal entity to the persons that own the shares in it. Conducting business through a company means that you are able to limit your liability to a certain extent (because it is a separate entity to yourself) and provides another step of removal from you personally against any issues that may be encountered
Please contact us for information or assistance with your asset protection needs.