Why protecting your assets is more important now than ever

With the number of lawsuits and similar cases showing up in Australia, subjects such as protecting ones assets are increasingly becoming more important. Anyone knowledgeable about the subject knows that Australia is unfortunately one of the more litigious countries in the world.

Although unfortunate, it is a fact that frivolous lawsuits are an issue and people are taking advantage of our legal system. Wealth can be acquired throughout an entire lifetime, and taken away by one superficial claim. This article will go about explaining the different ways you can protect yourself from this fact so that you never have to suffer from a frivolous creditor.

Individual ownership of assets

The best way to shoot yourself in the foot in terms of asset protection is to own investment properties in your own name. In the case of being sued you are at risk of losing everything under your name.

Many people would argue the tax benefits and cost effectiveness you would receive by using your own name, and they would be right, but the argument for the potential loss is a much better one if your focus is on protection.

Company structure

An alternative to individual ownership is using a company structure, which is characterised by being a separate legal entity from the owner. In the case of asset protection, this is a much safer and wiser choice as the risk is transferred to the shareholders in the company.

The issue with this structure is that if the individual happens to own all the shares in the company, much of the asset protection benefits you would receive from this form of ownership would dissipate.

Trust fund

Typically, property investments owned in a generic trust are the way to go over the above examples. The benefit of this is clear, the individual does not own the asset, but rather the trust does. The individual however, does control it.

During the situation of a lawsuit, a person with a trust does not bear any potential loss or risk that a company structure and individual ownership do. The only caveat is that you must know what trust is right for you for many reasons including tax effectiveness; whether you’re a business or on your own will have a lot to do with this.

What about insurance?

Many individuals mistake asset protection for insurance and make the fatal mistake of choosing one over the other. The truth is, both supplement each other and are mandatory. Having insurance provides many benefits towards asset protection including legal fee assistance, funds to settle lawsuits and so on.

Now that you’re aware of the main forms of ownership in relation to protecting your assets, you can judge your situation and make an informed decision. Contact us to discuss your investment options.