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Wills, Estates & Wealth Protection

Most people have assets.These might be in the form of a family home, a car, a business (such as a professional practice), a share portfolio, investment real estate, valuable artworks, and so on.

Most people who are fortunate enough to have a lot of valuable assets need a way to protect this wealth from risk. We all know that you can’t take your wealth with you when you die. Wealth protection strategies are designed to prevent others taking your wealth from you while you are still alive. Wealth protection planning is a process by which the assets that make up a person’s wealth, whether they are personal assets, business assets or other investments, are organised so as to protect them against risk.

What risks do I need to protect myself from?

We live in an increasingly litigious society. Litigators are becoming more and more aggressive. In fact, Australia is recognised as the second most litigious country in the world (after the United States of America). People can become defendants in law suits in which substantial damages are sought against them, through no fault of their own. Quite often, insurance is either unavailable, or inadequate. It is not uncommon for the cost of defending a claim, let alone the cost of satisfying the claim if you lose, to be financially crippling.

Also, Australia is among the most highly regulated countries in the world, with virtually all business activity being the subject of state and/or federal government regulation of one kind or another. Some regulation is so complex that maintaining total compliance at all times is virtually impossible. The penalties imposed for failing to comply with regulations can also be financially crippling.

A person’s wealth can be placed in jeopardy from other risks, such as:-

• Claims made by a former spouse, or de facto partner, following a relationship breakdown.
• Claims made by disgruntled business associates or employees.
• Claims arising out of a person suffering a serious illness.

These risks can arise out of circumstances that are neither foreseeable, nor involving illegal or self-destructive conduct. They can arise out of the everyday activities of people going about their business.

How do I know if I need wealth protection?

Everyone should have strategies in place designed to protect their wealth. But some people are more obviously in need of wealth protection strategies than others. These people include:-

• The very wealthy
• Those in the public eye who have some degree of celebrity status. Often, people such as these are seen as prime targets for overzealous litigators and regulators.
• People who have a concern or suspicion that they may face some form of legal, financial or even medical difficulty in the not too distant future.
• People who own a business, or who are engaged in a professional occupation. Any business owner or professional practitioner is, whether they like it or not, at risk of being sued.

When should I consider a wealth protection strategy?

In order to be successful, wealth protection planning must be a proactive exercise, not a reactive exercise. This means that wealth protection strategies must be developed and implemented before any of the risks discussed above actually arise. Generally, legislation (such as the Bankruptcy Act) will allow strategies to be challenged, if they were implemented after a risk has arisen.

What are some examples of successful wealth protection strategies?

Importantly, there is no one-size-fits-all wealth protection strategy. Each person’s particular circumstances need to be carefully reviewed, and a strategy developed that is appropriate for those circumstances.

Some strategies that often form part of a wealth protection plan are:-

• Using companies and trusts to quarantine assets that involve an inherent degree of risk.
• Ensuring that active assets (such as a business) and passive assets (such as a share portfolio, or investment real estate) are owned by different entities.
• Giving inherited wealth to your beneficiaries, and receiving inherited wealth from your benefactors, through testamentary trusts.
• Skilful use of debt and securities, particularly debt and securities involving companies and trusts in which you have an interest.
• Structuring the appointment of company directorships within a family group to limit the family group being exposed to risk arising out of directors’ liabilities.
• Strategic use of superannuation and insurance.
• Developing agreements to deal with the orderly succession of business ownership after critical events such as death, disability and voluntary retirement.

The Stacks Wealth Protection Law User Group

At Stacks/The Law Firm we offer a unique and personalised service in Wealth Protection. The Wealth Protection User Group has been established across all of the Stacks/The law Firm offices. This means that wealth protection specialists from over 20 offices in NSW and QLD can regularly come together via conference calls and face-to-face meetings to share common precedents, pool resources and collectively problem solve. This is a real benefit to individual clients, who receive a consistently high level of service.

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