Trusts & Asset Protection

Asset protection

Asset protection is one of the main aims of a good estate plan. It involves structuring of your affairs in a way that your estate assets are protected from future creditors and predators.

Your assets may be exposed to the risk of bankruptcy, family law claims, claims against your estate, etc.

A suitable estate plan can reduce those risks and ensure that your wealth and assets are protected for future generations and that your estate is left only to those you intend to benefit.

Example of documents that may need to be prepared are special disability trusts, family discretionary trusts, beneficiaries-controlled trusts, deed of family arrangements, parent child loan agreements.

Trusts in general

Different types of trust structures could be used for investment, asset protection, vulnerable beneficiaries protection, charitable purposes, etc. Choosing the right trust structure requires careful consideration of its financial and taxation implications. Hence, it is important to obtain legal, financial and taxation advice from an appropriately qualified person.

Carefully choosing the trustee, knowing the trustee’s powers and duties also have an important role to play in a trust.

Testamentary trusts

The effect of a trust is the separation of the beneficiary, from the legal ownership of property. Holding assets in trust can protect them from claims by third party creditors in the event of bankruptcy, insolvency, court, or family law proceedings.

A testamentary trust is a discretionary trust contained in a Will that comes into effect when the testator dies. A trustee is pre-appointed to manage the trust and may choose how and when the deceased’s assets are distributed to beneficiaries. The flexibility and control in distributing assets has potential benefits including the protection of vulnerable ‘at-risk’ beneficiaries such as minors, those with intellectual disabilities or drug and alcohol addictions.

Even modest estates may benefit from having a testamentary trust, particularly where the testator is part of a blended family.

Trusts are complex and sound advice is important to ensure the trust is compliant, structured to achieve the required objectives, and that any stamp duty and taxation implications are considered.

Making the most of your superannuation

Death benefits of a superannuation account are paid to an eligible ‘dependant’ determined by the fund trustee, or in accordance with a Binding Death Benefit Nomination (BDBN).

Consideration of the way death benefits are taxed in the hands of the recipient, is important to ensure the most tax-effective results are achieved.

Essentially, a spouse or partner will be considered a tax-dependant under taxation law and accordingly, will receive death benefits tax free. Alternatively, whilst adult children are considered dependants under superannuation legislation, they are not ‘tax-dependants’ and will need to pay tax on some death benefit components.

A BDBN will ensure that your superannuation benefits are paid to the intended beneficiaries and receive the most advantageous tax treatment.

Self-managed superannuation fund (SMSF)

SMSF is a vehicle that a lot of high-net-worth individuals use to hold property and other investments to secure sufficient funds for retirement.

For initial discussion or advice contact us at info@legallysmart.com.au or call 02 6108 3683.