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The key asset for most people is the family home.    Asset protection is for anyone at high risk,  not just high wealth individuals.

So who is an “at risk individual”?
  • Anyone who has their own business no matter whether you trade as a sole trader or another entity
  • Anyone with a investment property
  • Anyone working in a high risk of being sued industry
  • Essentially if you need to have landlord insurance, or professional or public indemnity insurance then you are most likely at risk.  The main reason for being at risk is due to under insurance.
Transfer of family home to spouse or trust
The typical asset protection solution for individual at risk is to move the family home into the spouse who is not at risk, or move it into a family trust.
The main issue concerned with moving the family home into the family trust is that it loses its CGT exemption for Primary place of residence.
Generally the transfer of property to a spouse will be exempt for Capital Gains Tax purposes and may also qualify for stamp duty exemption.  (You should check with your solicitor on this).
Gift and loan back strategy
Another strategy used which is not 100% asset protection but offers some protection, is the gifting of the equity in the property to the family trust.  The trust then takes a second registered mortgage over the property (assuming the bank has a first registered mortgage).  This strategy involves stamp duty, financier consent, Capital gains tax and has top up issues (that is, as the equity increases, you need to top up the amount gifted to the trust)
IMPORTANT NOTE – When considering transfer of a property, if you declare bankruptcy within 4.5 years of the transfer, the administrator of your bankruptcy can claw back the property.
WARNING – As part of your estate planning you should consider that if something happens to the spouse of the at risk individual, the will may set out that the property transfers back to the at risk person – thus undoing the careful plans you have made.
It is vital to talk through your plans with a solicitor to ensure that the asset protection and estate planning techniques you put in place are suited to your needs.
Keeping your tax compliance up to date
When considering asset protection it is important to note that if you have not lodged your tax return for many years and would have tax to pay if you did, then you can be deemed as being bankrupt from as early as the last tax return you did lodge.  This would allow an administrator of your bankruptcy to claw back any transactions such as gifting of money or transfer of property that may have occurred since the date of the last tax return lodged to present.
Posted in Asset Protection
Please note that due to Covid 19 restrictions, we can only have one client in a meeting with a staff member at any one time. We will be staggering appointments and staff availability due to this.
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