Asset protection is an area that has received a great deal of focus as more Australians look at putting their assets out of the reach of creditors.
Many people need to consider structures that protect the family home, investment assets and business assets. As litigation increases especially against professionals and business owners the need to protect assets increases. The family home is also an asset that needs to be put outside of the reach of creditors.
Overview
Following the collapse of a number of large insurance companies and tidal wave of litigation the structuring of assets to protect them from creditors is crucial.
The family home should be acquired in individuals names where possible to take advantage of the various exemptions and concessions provided for in relation to land tax and capital gains tax. The use of trusts to hold the family home should be considered as a last resort where either there is a single person who is highly exposed to litigation or both husband and wife are both at risk of litigation.
The structure of acquiring the home 99% in the non-risk taking spouses name and 1% in the risk takers name should always be considered.
Many people entering business give little if any consideration to the correct structuring of assets to avoid exposing core business assets to litigation. The operating entity, the entity that deals with suppliers, employees and customers should NOT hold any appreciating assets (ie real estate). Appreciating assets should be held in a discretionary trust or superannuation structure.
Investment assets including property, shares and managed funds should be acquired in a trust to provide not only asset protection but also flexibility regarding the distribution of income and capital gains. If the trust is a non-fixed trust (discretionary or family trust) then the assets of the trust are not subject to any litigation against the beneficiaries.
WARNING: Amounts owed by the trust to a beneficiary would be subject to litigation against that person and therefore loans owed to high risk family members should be avoided.
Find an InvestorOne financial advisor near you