Asset Protection Strategies

Asset Protection Strategies

Once you have accumulated assets, it is important to begin putting in place the appropriate structures to protect them. Although this may seem unnecessary if you are in a secure financial position, you must remember that your circumstances may change and losing assets through litigation can happen if they are not properly protected. If your assets are all owned in your personal name, then you may be particularly vulnerable to asset loss.

If you are being pursued by creditors, assets you are liable to lose include:

  • Any property you own, including your primary place of residence
  • Any vehicles you own, including your primary source of transportation if its value exceeds $8,100
  • Your tools of trade if their value exceeds $3,800
  • Money, both physical cash and the amount you have in your bank account

Both your personal and business assets can be lost if you have not taken the necessary steps to protect them. This is why asset protection is a vital part of financial planning. To ensure you have the most appropriate measures in place, you should contact a lawyer to assist you. A Lawyer will be able to assist you in setting up the following protections for your assets.

Trusts & Business Structures

For asset protection during your lifetime, you should be looking into trusts and company structures. With the correct trust, tax and business structures you can minimise asset loss and ensure remain secure in your lifestyle.

Trusts are a popular method of asset protection as they transfer ownership of your assets to a trustee, who holds the assets on behalf of the beneficiaries. As a beneficiary of a trust, you will not be the legal owner of your assets, therefore creditors will not be able to take them from you.

Setting up a trust is not a simple solution that will always benefit you, there are many kinds of trusts which all entail different advantages and disadvantages. The different types of trusts you can use for asset protection include:

  • Family Trusts
  • Testamentary Trusts
  • Business Trusts

When establishing a trust, you must consider which type of trust is most suitable for you and how your trust may affect your taxes. You need to consult a lawyer before establishing a trust so that you can benefit from informed advice regarding the type of trust you should place your assets in.

Beyond trusts, you can further protect your business assets by ensuring your business is structured in the way most beneficial for you. The four most common business structures in Australia are:

  • Sole Trader – This structure will give you full control of your business
  • Company – This structure will limit your liability by making your business a separate legal entity
  • Partnership – This structure will divide income and losses between multiple owners
  • Trust – This structure will make a trustee responsible for business operations

You can protect your assets by structuring your business as either a company or a trust, as these structures will limit your liability. You can change your business structure at any point over the lifetime of your business, but you should consult a lawyer before undergoing any major changes to ensure the new structure will protect your assets. A lawyer will also be able to assist with the changes to your taxes that may occur as a result of changing your business structure.

Estate Planning

To protect your assets at the end of your life, you must begin estate planning. Planning your estate involves more than writing your Will, as you must also consider what will happen if you have diminished capacity and require full-time care. When estate planning, your main objective should be to ensure control of your assets gets passed to the people of your choice in a timely manner with minimal tax repercussions.

The first step in developing a complete estate plan is to create a Will and ensure it remains up to date over the course of your life. Once you have a Will, you must also consider:

  • Superannuation – Your super will not be immediately paid to your estate unless payment to your estate is specified in the agreement you have with your super fund. To control where your super goes, you must have a Binding Death Benefit nomination.
  • Life Insurance – If you have a life insurance policy outside of your super fund, you will generally be able to nominate who will receive the payout once you have died. In cases where you have not nominated a beneficiary your policy will be paid to you estate, in which case there will be a legal requirement to provide Probate or Letters of Administration.
  • Tax Consequences – Depending on how your beneficiaries receive your assets, they may be required to pay tax on them. There are multiple strategies you can employ to limit the tax impacts faced by your beneficiary; a lawyer will be able to help you implement them.
  • Power of Attorney – You can nominate someone to carry out tasks on your behalf if you ever lose the capacity to handle your affairs. You can also nominate a Power of Guardianship, which will allow someone to make choices regarding your health and lifestyle. When nominating people to these roles, you must ensure you trust them as they may end up with significant control over your life and affairs.

With a robust estate plan in place, you will be able to protect your assets beyond the end of your life and make sure your beneficiaries receive what you wish to give them.

Changes in Spousal Relationships

Spousal Relationships

For couples entering into a marriage, the thought of how assets will be divided in a future separation may not have occurred. However, if you wish to secure the assets you have accumulated prior to the marriage, you must put protections in place to ensure you keep them in case of divorce. A family lawyer will be able to assist you by preparing a Binding Financial Agreement (more commonly referred to as a Pre-Nuptial Agreement). These agreements will address how to divide assets after a separation and will remove the Family Court from the decision-making process. Similar agreements about the division of assets can be entered into at any time during a relationship.

If you are experiencing a marriage breakdown but do not have a Binding Financial Agreement, the decisions around who keeps which assets could be made by the Family Court under the provisions of the Family Law Act. Despite the common belief that divorces will lead to an equal split in the assets between partners, there is no set formula followed by the court when dividing assets and partners rarely receive exactly half of all assets. Considerations made by the court whilst dividing assets include, but are not limited to:

  • Assets and liabilities of both parties
  • Assets owned by each partner prior to the marriage
  • Financial contributions made by each partner toward assets, e.g. renovations to properties
  • Length of the relationship
  • Whether there are children involved and who the primary caregiver is
  • The age, health and income of both parties

To ensure you get your fair share in a divorce, you need to contact a divorce lawyer. A lawyer will keep you informed of your rights and represent your best interests, having a lawyer will give you the greatest chance of protecting your assets.

At Le Brun & Associates, our dedicated team of lawyers can assist you in setting up trusts and correct tax structures so your assets are protected if you circumstances change. We can provide advice and legal assistance to keep you secure. Contact us today for your FREE 30-minute consultation. At Le Brun and Associates, we always stand by you.

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