Tool Box
Issue No. 23 - June/Nuly 2005
Protecting the Crown jewels
by Mr Tony Martin
Bankruptcy, certain death, rising divorce rates — we live in risky times.
Yet asset protection often doesn’t command the kind of attention showered on its sexier sibling, asset accumulation.
Asset protection is one of the foundations of a financial or business plan, ensuring assets remain intact and providing some security for a wealth accumulation strategy.
While ill fortune is virtually impossible to predict and some risks are difficult to avoid, planning ahead begins with a realistic assessment of risks and a handful of strategies to minimise them.
Risky business
In an increasingly litigious world, the reality is that most of us are at risk.
- Directors, executives and small business owners are increasingly open to legal action from employees affected financially as a consequence of workplace dealings. With an average of more than 500 Australian companies going bankrupt each month, such legal action can be a real possibility.
- Professionals and sole traders (including tradespeople) can face multi-million-dollar claims under liability and professional negligence law, and may be personally liable for their business debts.
- Property owners, motorists and those who employ domestic staff, such as cleaners and gardeners, may also be at risk of claims against them.
However, risks to assets can also arise from insufficient attention to risk when determining business structures, estate planning and succession planning for business owners.
Making a will is a must. But for some people, a traditional will can result in a significant tax burden for their spouse in the event of death.
Using a testamentary trust is one way to address this problem, allowing the trustee (who may be the surviving spouse) control of the assets, and over how they are distributed to other beneficiaries, such as minors, thereby enabling them to receive the more favourable adult tax treat...
