Asset Protection

Think asset protection doesn’t apply to you? Think again. If you have assets in your name, you could be at risk. There is no surprise that protecting assets against frivolous creditors and lawsuits is increasingly becoming a common concern. To avoid significant losses, it is important to have reliable and effective asset protection strategies so you can continue to grow your wealth and achieve your financial objectives.

• What are the safest asset protection strategies?
• What is the risk without having asset protection strategies in place?
• What is a testamentary trust?
• How can a testamentary trust be utilised to minimise tax?
• Do I still need asset protection if I have insurance?

What’s the best approach to protecting your assets?

Many Australians who have built up their entire wealth and property portfolio in their personal names are especially vulnerable to losing their assets. Assets owned in personal names can be better protected without triggering taxes if you get asset protection advice.

There are several myths and mistakes regarding asset protection – in particular, owning assets in individual names, the use of company ownership and the improper use of certain types of trusts in the absence of sound tax planning and estate planning advice. The best way to protect your assets is to be aware of the all the tax and legal ramifications of using particular types of property investment trusts and structures and ensure you get personal tax advice from an asset protection specialist with regards to your investment portfolio and wealth creation plan.

Asset Protection involves implementing strategies to separate your personal assets from your business risks. Asset protection is an essential part of any business structure to be considered by professional advisors and clients alike.

It is extremely surprising that many company directors or business owners continue to personally hold family assets in their own name, exposing their personal portfolio to the business risk they encounter in their capacity as a company director or a business owner.

No doubt you are well aware of the risks faced by business owners and other stakeholders in conducting business in this current economic climate.

We are continually hearing suppliers are tightening their cash control in particular areas of the economy and clients are slower and unable to complete their contracts when expected.

Factors include:

• Banks reassessing their lending criteria;
• Tightening credit levels;
• A more rigorous and active tax office in respect of audits and collection processes; and
• A decline in the general trading conditions for some sections of the economy.

In addition, there is now greater risk associated with being a company director.

Administrators/liquidators of companies can make directors personally liable for the actions of their company and the Australian Tax Offices (‘ATO’) can pursue directors by using their additional powers under s.588FGA of Corporations Act 2001 even where a Directors Penalty Notice is a full defence. Under s 588FGA of Corporations Act 2001, if a liquidator of a company recovers an unfair preference from the ATO, the ATO has the right to pursue the company directors for the amount which the ATO is liable to repay to the liquidator. Combined with recent changes to the Directors Penalty Regime, company director’s potential person liability has significantly expanded.

It has never been as important to assess your current asset protection strategies. Have you separated your personal assets from your business risks?

The best time to implement or update your strategy is when your company or business is in sound shape. Attempting to implement asset protections strategies once your business is in financial difficulty will leave you susceptible to bankruptcy law and possible civil sanctions.

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