Legal Tip 16: Asset Protection: General Issues

Discussion in 'Legal Issues' started by Terry_w, 4th Jul, 2015.

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  1. Terry_w

    Terry_w Structuring Lawyer and Finance Broker - all states Business Member

    18th Jun, 2015
    Asset Protection: General Issues

    The idea of asset protection is to put family assets out of the reach of creditors if one or more family members were to end up bankrupt. But asset protection on death should also be considered as you want to make sure ‘your’ assets don’t end up in the wrong hands. Family Law is another area to consider as assets can be lost in family law type disputes.

    Just considering bankruptcy for the moment, there are 2 broad aspects to consider

    1. Protection for existing assets and

    2. Protection for future assets

    Future assets can be easily protected by setting up ownership structures which can be planned from the beginning.

    Existing assets are more difficult as any transfer will result in

    1. possible transfer duties such as stamp duty

    2. possible capital gains tax

    3. potential clawback provisions relating to the transfer

    Changing ownership may not save the asset as there are clawback provisions to consider under several areas of law

    1. Bankruptcy Act

    2. Conveyancing Act

    3. Corporations Act

    4. Family Law Act

    5. Succession Act

    Transferring ownership must generally be done at market value, otherwise the transaction would be more easily attacked. That will mean the transferor (the person transferring) will receive a large sum of cash. This cash is then property that is at risk under the bankruptcy and other acts mentioned above. Therefore the cash must be spent, or gifted. If it is gifted then it is an ‘under market value transaction’ and this will be subject to clawback provisions.

    Therefore it is important to consider asset protection before purchasing any asset of value. ‘Fixing’ things later can be expensive and the asset protection can never be as good as if it was set up from the beginning.