We know that you’ve worked really hard to accumulate what you have.  Time, sacrifice, and who knows what you’ve had to put up with.  The smart thing to do seems to be to have your money working for you, and growing.  But how?  Part of the strategy needs to be tax effective asset protection – a place where you can grow your wealth in a tax effective way and know you’ve got a safe box that is difficult to break into.

Why is it important to have a tax effective strategy?  Because tax reduces your pool of wealth, which means you have less money to re-invest.  If you have less money to re-invest then your wealth grows more slowly.  It’s not even a case of finding a tax loophole, sometimes you have a choice as to which tax rate you will end up paying and it makes sense to pick the one that is lower.  If you work just as hard as everyone else but they’ve picked a lower tax rate, over time, they will be wealthier than you – all for the same amount of effort.

Why is asset protection important?  Because certain choices expose you to risk, and you will probably make some mistakes.  This is normal.  The choice you do have is how much you pay for those mistakes.  This is particularly important for someone having a go at a business, or in some cases even embarking on a de facto relationship or marriage.  There are ways to increase your personal level of security.

Assets strategies need to be carefully thought through because they need to work when you need them to, and until they are tested you will never truly know. It is not just the case of setting up a trust or buying a set of documents online. This protection comes from the strategy. The documents need to reflect the strategy. If the documents are just standard documents they don’t reflect any strategy – they are just documents.

Frequently Asked Questions

It is means setting up an strategy that will enable you to preserve your wealth as much as possible from adverse legal events.

Ultimately, asset protection is designed to protect against certain events – and the events depend on what are you doing. If you run a business, you may be protecting your assets from creditors, in the event you are sued, or if something goes wrong. If you are about to enter into a marriage or de facto relationship and are worried about that then asset care could help you preserve as much as possible of your existing wealth.

Asset protection is a strategy, not just a set of documents.  The first step is to determine what you are protecting your assets from – this enables a strategy to be formulated.  The second step is to create the documents that reflect that strategy and to make any appropriate arrangements (e.g. insurances).  The third step is on-going – you need to be consistent with the strategy.  The strategy and the documents won’t help you if you aren’t going to follow them.  If in formulating an asset protection strategy you think you won’t be able to follow it, then you may be better off not doing it at all.

If you think it is worth protecting your assets then it is worth having a strategy.  Asset advantage should also be done having regard to tax planning, as the two go hand in hand.  You would ideally want a set up that works for both your asset protection and your tax needs.  Also, the earlier the arrangement is in place the better – if you put in place a strategy at the last minute then it might look like you are trying to get out of paying someone and this means the strategy may not work.  By contrast if you have one in place early and ‘its always been this way’ then you have a greater chance of your assets being protected or preserved.

Asset protection is only for people who want to be wealthy.  Obviously if you are not optimizing your taxes (leaving you more money to reinvest and grow your wealth) and minimizing losses then you will have less wealth at the end of the day than someone who is.

Definitely.  For the strategy to work it needs to be followed.  It is possible to have a great asset protection strategy that is terrible for your taxes and your plan to transfer your wealth to your family.  Once you create a structure, it can also be expensive to change it for tax reasons.  It may even be impossible.  One of the issues with taxation is that changing an arrangement to one that results in a lower tax bill can trigger the anti-avoidance rules, which are essentially designed to look at the reasons a different structure is now being used and determine if its for tax reasons.  If it is for tax reasons, the tax office can adjust your tax bill back to how it would have been before the new structure (i.e. higher) and you will need to prove in court that you didn’t change the structure for tax reasons.

It depends on what assets you choose to hold.  The best way of thinking about it is you should have an overall strategy for asset advantage and for tax, and know that changing can be quite expensive.  In some cases owning something in your personal name would make more sense.   It is difficult to answer because asset protection strategies that have a chance of working are very customized.  Throw away lines like “put it in your spouse’s name” would not necessarily make sense, say, if it results in an accumulation of so much income that your spouse is paying a higher tax rate than you.

No, you can still be sued.  The only thing asset care changes is how deep your pockets are.  Obviously if someone is after money they will be less likely to sue someone who doesn’t have any.  However, asset protection is the last line of defence.  If someone really wants to get you there are still plenty of bad things they can do (people can act irrationally when they are emotional and being egged on by lawyers excited about earning more fees) – the only difference is some of the wealth you have generated will be preserved if the worst happens.

Not necessarily.  The strategy needs to be customized otherwise it may not work.

In small and medium businesses asset protection is key because one adverse event can sink the entire business and everything you worked hard for.  It could be something as simple as a major customer not paying a large bill, which has a flow on effect to the rest of the business.  The key is to silo different parts of the business so if one part has an issue, the rest of the business can continue unaffected.  You don’t want to be starting from scratch all over again.  It also takes a while for the legal process to go through all the motions, so you don’t want to be waiting around for years before you can start again either.  Its best to create a silo and to continue going strong.

Get better asset protection with Adam Ahmed & Co

Adam Ahmed & Co have developed strategies that assist our clients wanting improved asset protection and estate planning ranging from simple solutions for assets, which are low in number or value i.e. the family home and one investment property, to more complex solutions for larger asset bases where an individual wants both asset protection and estate planning. We are here to support your needs, in a way that best suits you.