Asset Protection: Act NOW to protect your entire financial savings!

Posted on May 15, 2015 by ATB Chartered Accountants

While ill fortune is virtually impossible to predict and some risks are difficult to avoid, planning ahead begins with a realistic assessment of risks you might face, and then designing strategies to minimise these risks.
In an increasingly litigious world, the reality is that you probably are at risk.

• Directors, executives and business owners are increasingly open to legal action from employees affected financially as a consequence of workplace dealings. With an average of more than 500 Australian companies going bankrupt each month, such legal action can be a real possibility.
• Professionals and sole traders (including tradespeople) can face multi-million dollar claims under liability and professional negligence law, and may be personally liable for their business debts.
• Property owners, motorists and those who employ domestic staff, such as cleaners and gardeners, may also be at risk of claims against them.

However, risks to assets can also arise from insufficient attention to risk when determining business structures, estate planning and succession planning for business owners.

As a result, you should be seeking advice from an experienced accountants or Lawyer as to how to own (in whose name) and how you can divest yourself of your assets, but at the same time retain effective control and not lose your family assets should you ever be sued.

ASSET PROTECTION IS ONE OF THE FOUNDATIONS OF A GOOD FINANCIAL PLAN, ENSURING THAT YOUR ASSETS REMAIN INTACT AND PROVIDING SECURITY FOR YOUR WEALTH CREATION STRATEGIES.
TOOLS IN ASSET PROTECTION

The basic way to protect your assets is to ensure that you have little, if any, assets held in your individual name. Possible structures that could be used include:

Trusts are structures which are effectively not owned by an individual. This can be powerful tool in asset protection. By holding assets in a trust structure rather than in a personal name, the individual is still able to enjoy the benefits of assets, but is not attributed ownership of those assets.

Wills and Testamentary Trusts are an effective way to protect assets that will be passed on to a beneficiary at a later stage. A well-constructed Will cannot only ensure that assets are protected, but they can also be structured in the most tax-effective manner on the death of a Will maker.

Superannuation – Superannuation in the accumulation phase is generally protected from being recovered by a bankrupt’s creditors. However, recent changes allow a bankruptcy trustee to recover the value of contributions made to an eligible superannuation plan by the bankrupt after 27 June 2006 with the intent to defeat creditors, for e.g. the bankrupt making large contributions to their super fund to avoid having to pay creditors.

When considering whether contributions have been made “to defeat creditors”, a court is allowed to consider the bankrupt’s historical pattern of super contributions and whether any contributions are out of character. If so, they may be deemed to have been made to defeat creditors.

Holding assets in a spouse’s name – Assets held by a spouse cannot be accessed by a trustee in bankruptcy providing that they weren’t transferred within 2 years of the bankruptcy, or during the period where the individual knew they were insolvent.

The business structure you adopt now should also accommodate your plans for the future, however, you are not locked into that structure forever – you have the option to change the structure as your business grows or changes in the future.

To ensure you can sleep better at night knowing that you’ve taken additional steps to protect your business and personal assets, contact the team at ATB Chartered Accountants TODAY!

This article is provided as general information only and does not consider your specific situation, objectives or needs. It does not represent accounting advice upon which any person may act. Implementation and suitability requires a detailed analysis of your specific circumstances.