“Asset Protect” Yourself – Rob Balanda

Those of us who have had a few runs around the block will remember the case that ran through Australian Courts some years ago. 

A husband and wife had structured themselves in a simple way years earlier with their property investments so that all assets were in the wife’s name.  The reason was that the husband had a very high risk job.  Then the wife was out on the golf course playing golf one afternoon when one of her misdirected golf balls hit a man in the head causing him serious injuries.

As a result she was sued for a lot of money by the injured man, and he was successful.

This case changed the whole landscape about asset protection and got people for the first time starting to use entities, such as companies and trusts, when they had never done so before, solely for the purpose of asset protection.

The case is a timely reminder to us that it is therefore not just a matter of trusting your spouse when it comes to asset protection.  Accidents do happen.

You need to take your asset protection beyond this basic level and implement company / trust structures to buy your investment properties and hold as little as possible in any personal name.

The whole strategy is based on there being no traceable link back to the entities which owns the assets.  You need to have a careful look at who really is at risk here.

Anyone who owns assets personally in Australia is at risk.

So why then do we persevere with this asset protection mentality where we continue to hold assets in personal names.  It is a middle class attitude that has got something to do with “pride of ownership”.

But what it really does though is it just leaves us exposed to greedy predators, looking to have a go.

By the same token, don’t despair if you already own a number of properties in personal names.

Asset protection is a process and a journey, not a destination.

[sam id=32 codes=’true’] Timing is important though and the sooner you asset protect yourself the better.

However changing structures and entities in which you hold properties is costly and can often trigger payment of GST, capital gains tax and loose the benefit of land tax exemptions.

You might therefore retain properties you own in personal names now and with new purchases implement the asset protection strategies by buying them in the name of a company acting as trustee for a trust.

Over time you might be able to undo the exposure you have with holding properties in personal names.

So don’t despair about it too much.  Asset protection is a journey.

Remember too, that ownership in a company / trust structure still looks like ownership, smells like ownership and feels like ownership.

But it does not have that sting in the tail of personal liability where you are the personal owners of the property.  You don’t own the asset personally but instead you control it through shareholdings and directorships of the company.

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Rob Balanda

About

Rob is a partner in the Gold Coast based law firm MBA Lawyers. He is a highly regarded educator of property investors and estate agents and the author of the "Made Simple" series of books and CD's.
Visit www.ClausesMadeSimple.com


'“Asset Protect” Yourself – Rob Balanda' have 2 comments

  1. October 24, 2013 @ 9:45 am Damien W

    Thanks Rob. Good reminder to consider the ‘what if’s. However what do you think of the costs involved? Facilities can be expensive and there’s also the difficulty in maintaining the negative gearing benefits. I know of hybrid trusts but I’ve heard some mixed opinion on the validity of using them to get the best of both worlds (ie asset protection and negative gearing). Any thoughts?

    Reply

    • October 24, 2013 @ 5:26 pm Rob Balanda

      Damien, yes , it is worth the costs.Think of it as a one off insurance premiium.And yes, there are trusts where you can preserve negative gearing benefits.They are tailor made just for the transaction but you can set them up.You will need to take specific advise from your tax advvisor about your circumstances and obtain your own advise about what is right for you.Regards…Rob B

      Reply


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