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.