Asset protection is often the most misunderstood and neglected form of personal and business planning.
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In simplistic terms, asset protection involves a process of reviewing and where appropriate altering the ownership structures of assets, together with other supportive measures, to ensure that tangible and intangible assets are better protected.
The aim is to mitigate the risk of financial harm through the loss of the assets as a result of economic downturn, third party claims, death or disability, business partner or family disputes, or as a result of the appointment of receivers or liquidators.
Since the introduction of the Personal Property Security Act Register, historical asset protection methodologies have been rendered ineffective unless such structures are supported by PPSA-compliant documentation and registration of a deemed security interest.
Other measures that should be considered include:
holding the family home in the name of the non-business, low-risk spouse; the separation of tangible and intangible assets from any business trading entity;
the utilisation of corporate entities; holding the ownership assets in properly drafted discretionary trusts; and
subject to receiving the appropriate financial advice, the maximisation of superannuation contributions and the ownership of permitted assets through a super fund.
Implementing these structures from the outset is of critical importance.
While it is not possible to guard assets against all forms of risk, taking proactive steps to implement the right structures and supporting documentation will go a long way towards mitigating the risk of such exposure.
The types of strategies that should be implemented will depend much upon the personal and business circumstances of the particular client.
In implementing any such strategies, professional advice should also be sought about any potential capital gains tax, stamp duty or legal consequences that may arise as a result of any such restructuring.
Disclaimer: Readers should seek independent legal advice as this article is for information purposes only. Daniel Cole is a director at Beck Legal, Bendigo.