.Using the right structure is just like insurance
If set up and maintained correctly, that structure can protect all your assets.
The 3 main types of lawsuits in Australia come from:
- personal actions involving motor vehicles;
- business ownership; and
- property ownership.
The 3 main areas of protection are:
- insurance;
- debt; and
- structure.
There are various forms of insurance that should be considered such as public liability insurance, landlord insurance, life insurance, pet insurance and income protection insurance. One important principle is not to be under insured. You should also consider the type of insurance and whether you are adequately covered. For example are you covered for uninvited guests? Are you covered for items taken out of the home that ultimately cause injury to someone else such as on the golf course?
Debt can be created to actually protect assets. You may choose to use the equity in your home to purchase other real estate, share portfolios or businesses. The extra debt would be allocated to those items and if you were to put these other investments for example into a structure where it is not held in your name then your risk will not be increased by buying other investments using the equity in your own name. You are holding your other assets in trusts. You would put the new investments into discretionary trusts with a company as the trustee. The company that would act as a trustee should be nontrading so at no time does the company expose itself to any risk of liability for any direct or indirect actions. If for example your only asset was the family home then you could if you had concerns about asset protection, borrower as much as the bank will lend you and then gift it to a separate trust by a deed of gift and then lend it back to yourself at an interest rate you are comfortable with (for example 0%) and you could then place it in an offset account so the interest is offset against itself and there would be no interest on the loan and if someone were to sue you personally they would see that your family home is mortgaged to your trust and accept there may be very little or no equity in the property and that it would not be worthwhile
Structure is important in protecting your assets. There are many forms of structures such as a sole trader, partnership, companies, trusts being discretionary trusts or family trusts. The use of trusts with a corporate trustee over assets held by you has the benefit of protecting any potential claim.
Blunden & Montgomery Solicitors have many years of legal expertise in this field, we’re happy to help you.