Protecting PPOR after transferring to spouse

Discussion in 'Legal Issues' started by Grey man, 5th Jun, 2020.

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  1. Grey man

    Grey man Member

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    PPOR in my name and I work in profession at high risk of litigation.

    A small amount is left to pay off the mortgage. Planning for wife to take out loan and transfer the property into her name.

    Question: is there anything else that can be done to help protect the property during the four-year claw back period after it's transferred?

    Is she better off applying for a larger loan than necessary, then parking the difference in an offset (or redraw)? Or does it change anything to pay down her loan over time but a keep a nominal amount so that it appear encumbered to creditors?

    Something else I'm missing?
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    heaps can be done.

    Have you sought legal advice?

    You have to make sure the transaction is done properly and transfers actually happen. You also need to rebutt the presumption of a constructive trust.

    There can also be related party loans, gifts, mortgages and assignments of debt etc.
     
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  3. Grey man

    Grey man Member

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    Ok. Thanks. It's nice to know there's options.

    In the process of finding helpful legal advice but want to have a general idea myself first so I ask the right quetions.

    What does "rebutt the presumption of a constructive trust" mean?
     
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    Even though it might be legally owned by the wife the husband will be presumed to own 50% or possibly all - especially if paid for with his money or joint money.

    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/

    Legal Tip 106: Resulting Trusts Legal Tip 106: Resulting Trusts

    Legal Tip 108: What is a Constructive Trust? Legal Tip 108: What is a Constructive Trust?
     
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  5. Stoffo

    Stoffo Well-Known Member

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    As an example
    Had a former employer go under years ago, the ATO being first in line went after his ppor, he argued successfully that his wife owned 50% of the ppor (and not associated with the failed company) so the ATO forced the public sale of the ppor and took half.
    This left them with 50% to buy again and start over.
    Not sure how the same situation would pan out if the property was only in the wife's name, @Terry_w might say that being married would entitle the husband to as much as 50% ownership and therefore could still lose if found legally liable........
    Still, operating as a PtyLtd entity you shouldn't be liable as a director unless proven to be fraudulent
    Time to find a better system
     
  6. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    If X owns the house and Y pays the loan and deposit a trustee in bankruptcy of X would go for the whole property.
    If X and Y were spouses they may still do so.
    Even if X owned the house and Y didn't pay for it there is a presumption that spouses hold the main residence 50/50 no matter whose name is it is in so if Y went bankrupt 50% could be lost.

    Of course it can work the other way too if the owner of the house goes bankrupt then the other would argue that they were the beneficial owner of half or all even though they may not be on title.

    See a case where this happened with kids and parents:
    Legal Tip 137: Arguing a Trust on Bankruptcy Legal Tip 137: Arguing a Trust on Bankruptcy
     
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  7. Buynow

    Buynow Well-Known Member

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    If you are negligent, isn’t the right thing paying compensation, rather than structuring assets to avoid your liabilities? Reminds me of building companies that go “broke” and start up under a different name.
     
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  8. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    This will depend on the circumstances. Plenty of 'innocent' people end up bankrupt threw no fault of their own.
     
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  9. Grey man

    Grey man Member

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    Unfortunately true. Of course I practice within the law and do my best work. Doesn't stop someone pointing the finger if something goes wrong, regardless if I'm at fault.

    re: protecting our PPOR. Those informative Legal Tips point me to investigate the other strategies you've suggested: "There can also be related party loans, gifts, mortgages and assignments of debt etc."
     
  10. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    You don't want to be one of those people stealing from the poor and driving around in your Lamborghini with a current affair chasing you but some examples I have seen are
    a) a guy got make director at work - he just signed personal guarantees for all the company car loans and was basically exploited by the people behind the business. He lost his family home.
    b) a builder who couldn't pay people because one of his big clients didn't pay him
    c) parents who guaranteed a child's property purchase with the defacto spouse doing a runner when the property dropped to 1/3 of its value
    d) a woman who was able to borrow $250k on credit cards and lost her house

    All their own faults to a degree but they were not trying to exploit the system
     
  11. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    I've made a collection on all my tips on asset protection and put them into a PDF at www.assetprotectionbook.com.au
     
  12. Stoffo

    Stoffo Well-Known Member

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    All businesses face this as a possible reality....
    When trying to build up a business, looking after many small clients over many years, it only takes ONE larger client not to pay (over a few months/invoices) to destroy your cashflow leaving you exposed to your own creditors, all thru little fault of your own/poor planning o_O
     
  13. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    I see some businesses who fail to adopt risk management strategies too.

    eg Construction industry Security of Payments Acts, credit agreements and guarantees, lien over sale of product etc. The importance of legal advice to assist is well worth the cost.
     
  14. thesuperman

    thesuperman Well-Known Member

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    Is this only for PPOR or would/could this apply to any investment properties and/or other assets?
     
  15. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    It could be for other assets, especially if the non-owner has part for it