What is Asset Protection

What are the main threats to your wealth?

During the good times and when the economy is flourishing people seldom think about potential problems or ramifications should ‘something go wrong’. By the time a negative event has occurred it is frequently too late to avoid loss of assets.

The level of risk to assets is largely dependent upon the nature of activities that someone undertakes and is involved in.

Strategies that are often uncomplicated can be put in place to protect assets. This is what is referred to as asset protection.

If you have items of value these can be at risk of being removed and taken away from you.

 

Only for the Rich and Wealthy?

It is a myth that only the rich and wealthy benefit from Asset Protection. In fact many of the most effective strategies can be established and put in place before any major wealth is created.

Key Areas for Asset Protection

1. Bankruptcy/Insolvency
2. Marriage Breakdown
3. Death

Some Threats to Accumulated Assets

1. Threats associated with carrying on a business. Some examples include:

  • Professional negligence in the provision of services
  • Inability to pay creditors leading to bankruptcy
  • Breach of contract
  • Inadequate insurance
  • Default on loans leading to repossession
  • Sickness or injury to a key player in the business
  • Recovery of joint loans from the asset rich borrower
  • Downturn in business conditions
  • Employee claims due to harassment or unfair dismissal
  • In ‘Partnership’ structures being responsible for the action of other partners, and
  • In some cases personal liability for debts when acting as a company director

2. Divorce

  • Flexible powers of the Family Court
  • Errors and omissions may invalidate binding financial agreements

3. Death

  • Litigation between family members due to poorly or inadequately drafted wills
  • Beneficiary involved in divorce action or bankruptcy proceedings
  • ‘Spendthrift’ action by beneficiary with inheritance funds

4. Rental Property

  • Lost rent due to damage by tenants
  • Periods of non-occupation due to inability to find tenants
  • Fires, floods. storms and other disasters

5. Personal

  • Sickness or injury
  • Employer insolvent resulting in loss of entitlements such as super and accrued leave
  • Car accidents – including compensation, damage and lost income
  • Loss of employment with inability to obtain new work (or only at a reduced wage)
  • Superannuation where it is not covered by a Binding Nomination