Bulletproof Asset Protection
Is there such a thing as bullet proof asset protection? In my view, no.
Risk Analysis
The first step in asset protection is to identify the areas of your life (and the way you do things) that expose your hard won personal assets to risk of being grabbed by people seeking to unjustly seek windfall advantage from you.
We have developed over 50 targeted questions written after years of advising people in this area and consolidated them into an easy to use checklist.
Our questions are grouped under these themes:
Risk Management Plan
Once the risks are identified, what are the strategies to minimise those risks? Our Checklist helps you develop and implement a risk management plan to protect your personal assets.
Wealth creation by keeping what you have
Wealth creation is just as much about quarantining and protecting what you have as it is about new opportunities.
Take action today with our Personal Asset Protection Health Checklist only $19.95
More resources: www.onlinelegal.com.au
Discretionary / Family Trust Assets exposed
A recent Federal Court decision has opened to door to these, once regarded as “safe as houses” structures, potentially crumbling under the weight of claims from unsatisfied unsecured creditors.
The decision is that of Justice French on 29 June 2006 in - Australian Securities & Investments Commission, RE: Richstar Enterprises Pty Ltd (ACN 099 071 968) v Carey WAD 83 of 2006.
This decision was essentially answering the question of whether property of a person could arguably include property held by a third party as trustee for any trust in which the person was a beneficiary?
Short answer: Yes, where the person controls the trust
The following statement is particularly sobering for anyone serious about asset protection using discretionary / family trusts:
“… [T]he beneficiary who effectively controls the trustee’s power of selection [of who to distribute to] because he is the trustee or one of them and/or has the power to appoint a new trustee has something approaching … ownership of the trust property.” (p9)
What the court found was that, where the trust is really a vehicle at the will of or under the effective control of a controlling person (either personally or though a corporate entity they control), that property is able to be treated as property of the controlling person for the purpose of a receiver appointed under section 1323 of the Corporations Act exercising control over it.
An example given by the court, gives this principle huge potential reach:
“By way of example, Mr Beck is a beneficiary of the Agribusiness Annuity Trust of which Eagle Bluff Nominees Pty Ltd is trustee. He is director and secretary of that trustee company. He is the original appointor under the trust and his wife, Anne Beck, the current appointor. The trustee has a wide discretion including the power to prefer one or other beneficiary to the total exclusion of another beneficiary [just like a normal discretionary trust]. Mr Beck would appear, through his trustee company, to have effective control of the assets of the trust. … His interest would appear to amount to effective ownership of the trust property. The property of that trust is, in my opinion, amenable to control by the receivers under s 1323.” (p10)
Asset Protection Lessons:
The “at risk” person, whose assets are seeking to be protected should, most conservatively, not be:
- A trustee
- An officeholder of the trustee
- A shareholder of the trustee
- An appointor of the trust
More resources: online Companies, online Trusts from onlinelegal
Asset Protection - Single Director Companies
Asset Protection is a word that rouses suspicion of unscrupulous corporate high flyers taking advantage of others. That is the furthest thing from my mind.
Asset Protection should be considered by all sober minded rational people living in an increasingly “rights driven” litigation mad society. Blame is often used as a lever for financial win-fall. The concept of reasonable recovery for loss is often forgotten.
This is particularly true for those involved in small and medium sized business. Here is a sample of unfair risks faced daily by many participants in this sector:
- Customers simply refusing to pay
- Customers (or others in the vicinity) making claims that the action (or lack of action) of the business leadership has caused them loss
- Personal guarantees having to be provided by the business leaders to every supplier of the business
- Staff starting a project and dropping the ball or simply leaving the game
- A mistake (which honestly, everyone makes) costing the business dearly
These risks mean that the leaders of these business enterprises must carefully examine just who should take on the role of “director” and so put themselves directly and often personally in “the line of fire.”
The Corporations Law in Australia has allowed a single officeholder (that is one person being the director and secretary) for some time now. It seems to me that small business owners must take advantage of this and ensure that only one of the partners to a marriage or de-facto relationship take this role and the risk that goes with it.
Here’s all you need to make a change from a multiple director company to a single director company:
Sole Director Package $49.50
Another useful resource relevant to all business leaders (and particularly those involved in leadership of Not for Profit Organisations):
Personal Asset Protection Health Check (for those involved in leadership of Not for Profit Organisations) LawPack $19.95
More useful resources can be found at www.onlinelegal.com.au. For example: