Asset Protection - will these scenarios provide me protection?

I have an accountant and a mortgage broker. What "professional" do people usually speak to when trying to set up the best asset protection for their investments?

I am a director of a company. I have never had any cases against me but as the business grows, the risk also grows. I am wanting to ensure I have asset protection for our investments. I am married and based in Victoria, Australia.

Will the below scenarios provide asset protection?

Scenario 1:
Our PPR home is under wife's name on title, joint names on loan. Does that provide me asset protection? My accountant advised it does, but thought i should triple check.

Scenario 2:
I was advised by my accountant that if we were to get an investment property valued at $1.4m with a $1.0m interest only bank loan against it, under MY NAME it should act as protection as the bank own most the property. Will I be protected in this scenario, now, and in 10 (plus) years time if the property value increased to worth $2.5m and I had a $1m loan against it? I would have thought if someone came at me with a claim for say $400,000, they would require me to sell the house, pay the bank then pay the claimant. My accountant spoke with my mortgage broker about this scenario and they thought the added layer provided me protection. But after thinking about it myself, I am unsure.

Any advice would be greatly appreciated.

 

Only lawyers can give asset protection advice as it involves several areas of law and the laws of equity. Not sure why people think accountants can give this sort of advice.



First of all what are you trying to protect from? Most people think of asset protection against creditors, but forget to consider:

a) Family law

b) Incapacity

c) Family on death



Scenario 1

Are your accountant about resulting trusts or constructive trusts – he or she will likely have no idea what they are.

It is likely a bankruptcy trustee could attack the house by arguing the wife is trustee for you.

What happens if your wife sells it without your knowledge = no much asset protection.

What if your wife gifted it to the RSPCA in her will?

What if she mortgaged it and spent the money borrowed at the casino?

See
Legal Tip 22: Buying a property in the name of 1 spouse for asset protection reasons https://propertychat.com.au/community/threads/legal-tip-22-buying-a-property-in-the-name-of-1-spouse-for-asset-protection-reasons.1221/


Scenario 2

If you buy a property and borrow to buy it with the lender taking a mortgage the lender is a secured creditor so they will come out in front of everyone else in the event of a claim. But the equity in the property will be at risk. If someone gets a judgment against you they could force the sale and the bank will take its share and the rest will go to you as the mortgagor. This cash as an asset and now at risk.



Furthermore the equity will build up over time and be exposed. Some non-lawyers will say you can just get asset protection by constantly increasing the loan, but this means borrowing further money – which is an asset.



Ask your accountant to explain the relevant sections of the bankruptcy act and the state property acts – such as s34B conveyancing act NSW.

 

@Terry_w is there a difference between advice, an opinion and guidance?

As a real estate agent might give an opinion or guidance on matters under the Real Property Act, Conveyancing Act or the Property Stock and Business Agents Act?

 

There is, but I don't know where the line is drawn.

 

Thanks Terry. So for scenario 2: under what structure or name would you general advise/guide someone to buy an investment property under if they were looking for asset protection against potential future creditors? And taking into consideration other possible issues as you mention within the context of VICTORIAN state property / bankruptcy acts?

 

You would need specific legal advice as it is not just a matter of 'buying in a trust'.

For starters read my legal tips - many are on asset protection.

 

I would argue when someone is successful at suing someone who provides poor guidance its called advice.

 

An insurer would categorise anything as advice if it helps them avoid paying out on someone's professional indemnity insurance.