Protecting Your Assets from Creditors

Asset protection is an aspect of financial planning intended to protect your assets against creditor claims. Both individuals and business entities can use asset protection strategies to limit creditors’ access to their valuable assets whilst operating within the bounds of debtor-creditor law.

If your business does not have the appropriate structures in place or you have built up your entire wealth and property portfolio in your personal name, you may be vulnerable to loss of assets. Hence, it is worth seeking professional legal advice to ensure that your assets are well protected.

What do I need to know about seeking Asset Protection advice?

Asset protection advice details the most appropriate company structure for your business and offers guidance with establishing the correct trust and tax structures as to the ownership of assets. A qualified Asset Protection lawyer can assist you in the protection of both your personal assets as well as those of your spouse as a result of challenging business periods, creditors’ claims or statutory demands. It is important that you, as a business owner, are equipped with the right knowledge as to debt collection and enforcement proceedings in order to minimise the loss of your assets in these circumstances.

What are the different types of trusts used to protect assets?

There are many common mistakes in asset protection planning that can result in the loss of personal assets. Always seek professional advice to ensure that your assets are well protected.

A trust is an agreement where a person known as the “Trustee” is under legal obligation to hold property for the benefit of other parties, known as the “Beneficiaries”. The Trustee is the legal owner of the trust property.

There are many different types of trusts which can be used to protect assets:

• Discretionary trusts or family trusts are a popular business structure in Australia as they offer many tax advantages while still providing for asset protection if you’re using a corporate trustee. This type of trust suits certain businesses better than others so it’s worth consulting with a legal professional to determine if this is the right structure for your business. For example, if you wish to use your property assets for investment purposes, then you need to consider a property-specific trust.
• Testamentary trusts can be used to protect an inheritance from potential family law claims. A testamentary trust is commonly known as a “will trust” as these do not come into effect until after a death. The main benefits of testamentary trusts are their ability to protect assets and to reduce tax paid by beneficiaries from income earned from the inheritance.
• Binding Financial Agreement, commonly referred to as a “prenup” is an agreement between couples that states how assets, financial resources and liabilities will be divided if the relationship should break down. This is one of the best used and most cost-effective tool to protect assets. Learn more here.

Drafting the right trust and obtaining the correct advice as to the most viable trust structure is crucial to circumvent the loss of assets. This also ensures that each individual’s needs are met and takes into account their current financial situation. You should periodically seek advice on the suitability of the structure, particularly where financial or family situations changes in subsequent years.

What are the common mistakes people make regarding asset protection and how can I avoid them?

There are several misconceptions and common mistakes that people in asset protection planning that can result in the loss of personal assets – in particular, owning assets in individual names, the use of company ownership and the improper use of certain types of trusts. To ensure the best possible outcome, always consult a legal professional to ensure you are receiving the right advice tailored to your individual and business circumstances.

At Le Brun & Associates, we support our diverse business clients in a variety of areas of law with specialisation in Asset Protection. We understand your needs and work closely with you to develop the right structures and strategies to avoid and minimise creditors claim against personal assets as well as claims threatening bankruptcy or closure of your business.

We are recognised in Victoria for leveraging our extensive network to ensure you receive sound accounting and tax advice paired with legal strategies to develop a robust plan tailored to your business and individual circumstances. If you’d like to know more, we offer a FREE 30-minute consultation with one of our fully qualified and professional lawyers. Contact us today on (03) 9741 6000 to discuss your requirements.