Asset Protection

A simple model of asset protection may mean within a family, that the active business person takes the ownership of a business, or becomes the director of the entity owning such business, enabling the non-active partner to hold family assets. It may also be that inheritance decisions may bypass the active business person.

Asset Protection – what are we talking about?

  • retaining power over assets, which are not individually owned (via a trust or other entity),
  • reducing exposure to claims,
  • quarantining the building of assets within the family.

Know and Understand

People in business need to know and understand their family and business set-ups from a legal structure point of view. Legal advice is available to investigate such set-ups and obtain all necessary searches and documents. Occasionally some structures may not have been reduced to writing anda multi discipline approach with legal, accounting and financial adviser may be necessary. A flowchart of a family’s asset structure from the accountant/financial adviser will greatly assist to know and understand the set-ups.

Exposures

Family Court/other related property disputes between partners:

  • Legislation enables a court, in property disputes between husband and wife and same sex couples to have wide powers to bring into a property dispute assets not necessarily in the name of one of the parties.
  • It may be that a party to a property dispute may beable to safeguard business assets from being part of a property dispute.

Claims by a trustee in bankruptcy and liquidators:

  • With individual insolvency, bankruptcy trustees have power to determine as voidable, certain transactions for the benefit of creditors or asset movements with ’smelly’ transfers.
  • Also with trusts and companies legislative power is available to ‘turn the clock back’ with insolvent, fraudulent and not full value transfers.

Business succession issues:

  • Incapacity and death;
  • A valid financial power of attorney is essential to cover the position on the incapacity of a business person, but care must be taken appoint an able attorney. Also, subject to a company’s constitution, a company needs to have in place a deed to provide an appropriate person to stand in for an incapacitated director, or have previously appointed alternate directors.
  • Are Wills in place to provide for beneficiaries with able and trusted executors. Is there a risk of the Will being challenged? Is there an infant beneficiary or a beneficiary with a disability and/or some potential beneficiary who is unable to deal with financial matters? A testamentary trust may be required.
  • With family trusts, a full review of all deeds, appointment of trustees and its controllers [normally called ‘appointors’ and or ’guardians’] must be done to ensure continuity with qualified and trusted persons.

Planning

  • Collaborative approach: In many cases clients need to work with their advisers in particular, legal, financial and accounting professionals to create a workable asset protection plan. Carrying out any plan may have income tax, duty and capital gains tax consequences.
  • Business succession: How will a continuing owner raise monies to continue business? Will a financier allow the outgoing owner to be discharged from his or her obligations, including guarantees etc? Advice will need to be provided about buy/sell and exit strategy agreements, together with funding mechanism [usually insurance].
  • We are able to advise you in relation to preparation of shareholder, unit holder, joint venture and partnership agreements, anticipating an impending dispute situation.
  • Powers of attorney [financial]: These are essential during our lifetime to ensure that wheels keep on turning. Moreover, the appointment of able attorneys is essential to ensure asset protection.
  • Wills: A deceased estate comprises only individually owned assets at date of death. A will maker needs to be aware that some assets controlled by him/her do not pass on death:
    – assets owned by two people or more as joint owners;
    – assets held by a trust;
    – assets held by a company [although a deceased’s share/s in that company will come into the estate];
    – life insurance with a nominated beneficiary;
    – superannuation with a nominated beneficiary

As to passing the baton, given a couple having control over family trust held assets, is it appropriate to enable the next generation to assume control. Family law and impartiality considerations are important at this stage of succession.

  • Superannuation/life insurance: The proceeds of them are quarantined from debt.

This is only a brief treatment of this topic. You are most welcome to discuss this area of law with us.