Tough times ahead: how to protect your assets

Bah humbug! Isn’t Christmas meant to be a time of peace, goodwill, and joy to all people?

A “Merry Christmas” to all and I trust we all have a safe and healthy New Year. However, looking at the current state of the world, I fear we may be in for some tough times.

I think it is appropriate to spend a few minutes speaking about how to protect your assets before we start on the drinks.

They say it’s easy to make a small fortune if you start with a big one. However, wealth is generally not easy to acquire, but very easy to lose. So, in this edition, I will discuss several ways to minimise the risks.

The following information does not constitute and cannot be relied upon as legal advice. If any of the issues resonate with you, we would be delighted to discuss them with you on a formal basis.

The first one is ownership of the matrimonial home; it is often sensible to quarantine that asset by placing it in your partner’s name. Ensure that they do not sign any documents, guarantees or anything that might expose them to potential risk.

Lawyer’s generally say that guarantors are a fool with a pen, and while they cannot be avoided in some circumstances, they ought to be limited. Never consider signing a joint and several guarantee.

In business, the golden rule is to separate your assets from your trading or where there are risks. It is generally unwise to be a sole trader where all your personal assets are at risk, and it’s certainly unwise to enter a partnership where there is joint and several liability.

You can be responsible in many circumstances for the debts of your partner. Generally, you need to consider corporate structures, or the use of the variety of trusts, appropriate to your needs.

Licencing is an underutilised asset protection measure. The general theory is that you hold your assets, and certainly any hard assets you have, in the name of one entity and licence it to the trading entity. That licence does make negotiations with a trustee in bankruptcy, or a potential liquidator much easier, when they do not have the capacity to continue to run the business.

Finally, if you’re leading a complicated life, simplify your death with a Will, and in many cases, a testamentary trust. When creating a Will, I would strongly recommend Enduring Power’s of Attorney, both medical and financial. You need someone who is capable of acting in your best interests if you lose legal capacity. 

Asset protection can be a mine field, but there is also a pathway through it. Let us guide you. •

Peter Nevile - Nevile & Co. Commercial Lawyers at Level 11, 100 Collins St.

Contact us at [email protected] or on 9664 4700.