Better way to protect asset?

A former employer entered into bankruptcy.
When they came to take his home he successfully argued that it was 50% owned by his wife, the property was still auctioned (to establish market value) with 50% being returned to his wife.
Other property was owned in/by his super fund and remained untouched.
Attempting to diverge assets is a waste of time...

 

not sure what you mean by 'diverge' but there was a case where a high profile lawyer went bankrupt and the day before he sold his house to his wife for $1. I thought why the heck would a lawyer do that. I then read the case against him and found out.

It was basically a bargaining strategy. Since he no longer owners the property it would be something the trustee in bankruptcy can just take. It is legally owned by someone else. they would have to mount a court case which could get costly so the wife made them an offer to repay part of the money they were chasing without the need to go do court.

You just have to make sure that the stamp duty is not more than the savings.

 

In the example I used, both the unions and liquidators argued (or told the employees they were) that the property divested from the director/owners name would be recovered, but it had been transferred to his SMSF prior to the establishment of the failed business and wasn't (basically we were lead to believe that any asset transferred or sold BMV to avoid paying the debts may be recoverable, but this may not be the case.....)

 

Very easy for bankruptcy trustees to argue 50% belongs to bankrupt. Surprisingly not expensive as there’s a long line of well established precedents. Trustees are so confident they’ll usually lodge a caveat as soon as they’re appointed.

A creditor can even get a property transfer reversed under Conveyancing Act (most states have a provision for transfer to defeat creditors). But yes, usually spouse just refinances & pays out 50% of the equity.

I might know that case Terry. Lawyer transferred for $1 before going bankrupt (NSW case). Wife’s defense was Doctrine of Exoneration which was actually a decent defense. Not a lot of case law on it but managed to negotiate a favourable settlement.

I think you would need to show he transferred it to defeat creditors. If it was asset protection before the creditors existed, would be difficult to challenge.

 

There is caselaw on s37A which says even if no creditors now the section can apply to defeating future creditors. The case is "chen" from memory.

 

Marcolongo v Chen (HC) on appeal v NSW appeal decision. There was a hindering of creditors to delay them being creditors. Court found a mere intention to defraud through delay etc. This acted contrary to the good faith limitations in s37A(3). In other words, the section does not require, for its operation to come into effect, that the intention to defraud is the sole or predominant intent.

"You cant get much higher than the high court " Darryl Kerrigan

 

Delaying creditors is still acting to defeat them. That is different to asset protection strategies implemented prior to establishment of a business.