Why is asset protection so important?
Asset protection is a strategy of protecting business and personal assets from the associated risks of divorce, bankruptcy and legal claims.
Some ways in which you may protect your assets:
Wills are legal documents setting out the intentions of the person making the Will. Your Will takes effect after you have passed away, whereas an Enduring Power of Attorney or Medical Treatment Decision Maker are legal documents that protect you whilst you are still alive.
Your Will sets out distribution of a person’s assets after their death and the way in which the distribution will take place.The person making the Will may appoint an executor of their choice to manage the assets after their death. If you do not have a Will, your assets will be distributed in accordance with the Interitance Laws and not in accordance with your wishes.
Joint Ownership of Property
Joint ownership of assets ensure that the asset automatically passes on to the other person in case of the death of one owner. However, the assets can be affected in the following situations:
- Either of the owners is a director of a company or carries out a business, and
- Faces a public liability claim
- Faces a professional negligence claim not covered by insurance
- Either of the owners incurs personal debts
It is important to ensure the joint owners of the asset have no exposure to risks before entering a joint ownership. However, a breakdown of the relationship can affect such an arrangement.
Transferring assets during the lifetime of a person – Inter vivos
If the intended transfer of assets takes place during the lifetime of a person, the assets do not form a part of the person’s estate upon their death or at the time of administering the Will. This protects the assets from potential challenges to the Will.
Safeguarding the assets in a Trust ensures that the person continues to use the assets during their lifetime. The beneficiaries of the Trust can be the person/s whom the asset holder wishes to gift the assets.
Similarly, in the case of testamentary trusts the executor of the Will holds assets in various trusts for the benefit of each beneficiary. In the event of a dispute arising, the assets are not owned by any person and it may be up to the Court to decide on who controls the trust and deemed to benefit from it.
It is important to be aware however, transfer of assets to a trust can be an expensive process and can attract transfer duty along with capital gains tax consequences.
Binding Death Benefit Nomination
A binding death benefit nomination ensures that the persons nominated receives payments of any death benefits. Otherwise, the trustee of the Superannuation has the power to decide the payment of any death benefits.
Contact MSA Lawyers today if you require advice on Asset Protection.