Asset Protection - is it Important?
By Andy Brown
The simple answer is yes, but what exactly is it?
Protecting one’s assets is all about planning to make sure any valuable asset is not able to be targeted by a creditor, bank or other entity making a claim on you or your business. History is full of sad stories where people have ‘lost the lot’ when unexpected events happen, sometimes out of their control, and their assets are seized by others.
How does one go about protecting their assets?
1. Get on the front foot and plan early
Even we can’t fix a problem the day before you discover you have one! The more time to plan, structure and manage your assets the better.
If you haven’t done any planning, it is probably too late to recover from an issue or claim that has already arisen. For example, if you can foresee an issue arising (ie, being made bankrupt) and you start to make uncharacteristic contributions to your superannuation fund, the transaction might be able to be clawed back by the trustee in bankruptcy who could argue that the asset would have formed part of the bankrupt estate if it had not been contributed to the superannuation fund.
2. Separate your assets where you can
Too many people hold all their assets in their own name because it’s easier, cheaper or they don’t even think about the best form of ownership at the time.
The most basic form of separation is to keep your personal assets separate from your business assets. In more complex situations a well-considered structure of asset ownership is critical.
3. Get the right advice
Be careful trying to do it all yourself. There are many legal and taxation concepts to consider, and engaging the right advisor will ensure you end up with the most effective structure.
Sometimes depending on your situation your advisor may be able to control some of the assets on your behalf thereby reducing your risk further. For example, your adviser could act as an executor of a deceased estate. We do this regularly when its not appropriate for other family members to do it.