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Why consider Asset Protection Strategies
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Protect your Assets with TMS Financials

Building and protecting your wealth requires careful planning and smart strategies to keep your assets safe. At TMS Financials, we focus on asset protection, making sure both your personal and business assets are secure from unexpected legal issues. One effective method we use is setting up your business as a limited liability company, which reduces your personal risk for business debts.

Work with us to design an asset protection plan that matches your financial needs and business operations. Our tailored strategies help guard your assets against potential risks and liabilities, ensuring your peace of mind.

Reach out to TMS Financials today to safeguard your business and personal wealth.

Protect your assets with TMS Financials

Tailored asset protection strategies

At TMS Financials, we create custom asset protection plans designed specifically for your financial circumstances and business requirements. We focus on structuring both your personal and business assets, such as your family home and business activities, to boost security and reduce risks. Our team ensures your ownership structures, such as family trusts or private companies, are structured to offer robust protection against potential liabilities, helping you preserve and increase your wealth securely.

Comprehensive risk management for business owners

Our service extends beyond legal advice in safeguarding your wealth. We guide you through risk management for owning and operating a business, and can advise on the optimal company structure. Whether it’s establishing a limited liability company or a sole director configuration, our primary aim is to protect your personal assets from business debts and protect you from personal liability.

Effective succession and transfer planning

We support business owners in securing their legacy with legal asset transfer strategies. We help you set up a business structure that enables safe asset transfers. Our approach ensures you pay the appropriate amount of tax, maintain control over your property ownership, and implement security measures. This comprehensive method protects both your personal and business assets, aligning with your financial objectives and business operations.

Protect your assets with TMS Financials

Our team at TMS Financials specialises in providing personalised tax solutions tailored to your unique situation. We can help you navigate through the complexities of tax planning, identify the most effective strategies for your situation, and ensure you maximise your tax savings.

We’re an Australian tax accounting firm with 30+ years of experience serving business owners and investors. Our reputation for reliability and exceptional client service is built on providing accurate financial advice and asset protection. We remain committed to serving our clients with integrity, professionalism, and quality, and have the expertise to help you succeed.

TMS Financials is online now

We are a Sydney based tax accounting firm servicing clients Australia wide online since 1993

Eng Sivieng

Principal of TMS Financials

We strive to build long-term relationships with our clients and to be a trusted advisor for all their financial needs.

Why property investors should consider asset protection strategies to protect against risk

Investing in property can enhance your wealth significantly, but it also exposes you to potential risks if you don’t implement effective asset protection strategies. Real estate involves fixed costs, like stamp duty and legal fees, and unlike more liquid assets such as stocks or cash, properties cannot be quickly sold or exchanged when you need funds urgently.

In Australia, property ownership is highly transparent due to the ‘Torrens Title’ system. Each property has a unique number and is registered with state land titles offices, such as the NSW Land Registry Services. This transparency makes it easier for creditors to identify property owners and target their equity during financial downturns. For example, creditors might place caveats on property titles to secure debts, placing your investments at risk.

To shield your investments from these risks, consider setting up a private company or a family trust, creating a limited liability structure, or keeping your business and personal assets separate. These strategies can safeguard your investments from legal and financial threats, helping to preserve your wealth and ensure financial stability.

Basic asset protection for personal and business security

Enhancing your asset protection starts with adding extra layers of security to your current insurance and asset management plans. Here are some strategies to consider.

Extended liability insurance

Obtaining umbrella liability insurance through your home or auto insurance provider can increase your asset protection. This insurance enhances your coverage against claims for personal injury. Make sure the umbrella policy you choose covers all potential types of claims and matches at least your net worth. If you expect to receive an inheritance, you might want to consider a higher coverage amount to cover your future net worth.

Managing separate accounts

Instead of transferring assets between spouses, from the high risk spouse to the lower risk spouse—a common strategy that carries risks, especially in the event of a divorce—it can be safer to maintain separate accounts. This approach ensures your assets stay within your immediate family, regardless of marital changes. Additionally, if you need to share a joint account with a business partner or another individual, try to keep the balance low to reduce exposure to their potential legal or financial problems.

Forming a business entity

For a small business owner or those owning rental properties, establishing a formal business structure, such as a Proprietary Limited Company, can protect your assets. This separates your personal assets from those of the business and limits any legal claims to the assets within the business, reducing your personal liability.

Setting up an asset protection trust

Trusts are an effective way to protect your assets. By transferring assets into a trust, you maintain control without legal ownership, shielding your assets from claims in legal disputes. This ensures your wealth is safeguarded and remains under your management, without the risk of loss due to legal judgments.

Types of Trusts for Effective Asset Protection

Trusts are an integral part of asset protection plans because they transfer the legal ownership of assets to the trust, rather than being held by individuals who might be personally liable. This strategy ensures the assets are protected in the event of legal actions against the individual. The trustee manages the trust and controls its assets without direct ownership, which effectively shields them from creditors. The use of trusts for asset protection is a concept that dates back to ancient Rome.

Here are some important types of trusts that provide varying levels of asset protection:

Discretionary Trusts or Family Trusts

A Discretionary Trust, also known as a Family Trust, allows the trustee the flexibility to decide how the assets are distributed among the beneficiaries. These trusts are commonly used to protect family assets and plan for future generations, and they offer tax planning benefits as well. Family trusts are eligible for the 50% Capital Gains Tax (CGT) General Discount, though they do not allow for tax offsets from negatively geared assets.

If you are interested in setting up a family trust, visit our page here for more information.

Unit Trusts

Unit trusts divide the trust’s assets into units that are owned in specific percentages, similar to share ownership in a company. This structure is beneficial for joint investment ventures. For detailed information on unit trusts, you can read our guide, Understanding Unit Trusts here.

Hybrid Trusts

Hybrid trusts merge features of both discretionary and unit trusts, offering flexibility in how benefits are distributed to beneficiaries.

Testamentary trusts

Testamentary trusts are established through a will and only become active upon the will-maker’s death. Testamentary trusts are useful for managing estate duties and providing for minors once you are gone.

Trusts and tax obligations

While trusts can be effective vehicles for protecting assets, they also come with certain limitations. For example, discretionary trusts cannot apply tax credits for losses on negatively geared assets. Also, there are specific considerations for land tax, such as the lack of a land tax threshold in New South Wales and a relatively low threshold in Victoria.

Strategies for protecting investment properties and assets

If you own investment properties or assets either personally or via a company structure, moving them into a trust can significantly enhance their protection. However, due to the potential financial implications involved when transferring assets, you should speak to a tax specialist.

When transferring personal assets to a trust, the assets typically must be sold to the trust, which can lead to considerable costs. For example, if the sale results in a profit, you will likely need to pay tax on those capital gains. Moreover, transferring property ownership can incur stamp duty fees, which can be substantial.

Another important factor is the refinancing of any debts tied to the assets. As the legal ownership transitions to the trust, any existing debts secured against these assets might require refinancing. In a tighter lending environment, it can be difficult to secure advantageous refinancing terms.

For more information on asset protection and how using a trust, such as a unit trust or a discretionary trust, can help secure your investment properties and assets, contact us today to schedule a complimentary consultation.

FAQs on Asset Protection

Is owning property in my own name a safe asset protection strategy?
Owning investment properties in your personal name provides minimal protection. If you face legal issues, such as claims from unsecured creditors or disputes in a business partnership, your personal assets could be at risk. Real estate, along with other business assets, are considered “dangerous assets” due to their high liability potential. While there are tax benefits to owning property individually, these may not outweigh the risks of potential asset loss.
Does transferring property to my spouse or partner provide secure asset protection?
Transferring assets to a low risk spouse or partner, such as holding investment properties in their name, is often seen as a protective strategy. However, this is not entirely secure. Creditors and legal actions can sometimes access these assets, especially during family disputes or relationship breakdowns. For better security, consider more robust asset protection strategies, such as establishing a trust or a separate legal entity.
Is a company structure a reliable way to protect my property investments?

Using a company structure to hold assets might seem secure, but it can come with significant limitations. As a shareholder, if the company faces legal challenges, both your shares and the underlying assets could be at risk. Moreover, properties owned through companies do not qualify for the 50% Capital Gains Tax (CGT) discount and offer limited flexibility in managing earnings or losses from negative gearing.

How effective is a trust in protecting property investments?

Holding properties in a trust can provide strong protection. In this arrangement, the trust—not the individual—owns the assets, which shields them from personal legal challenges. Trusts can be managed by an individual or a corporate trustee and offer flexibility in allocating income or losses to various beneficiaries, thereby enhancing asset protection and financial management options.

What is the difference between safe and dangerous assets?
“Dangerous assets”, such as real estate and other business properties, carry a high risker of loss in instances in which you may be personally liable. In contrast, “safe assets”, such as shares in publicly listed companies, bonds, or individually owned bank accounts, generally do not entail inherent risk. Choosing the right type of asset and protection strategy is crucial to mitigating potential legal and financial challenges.

Next step is to contact TMS Financials

TMS Financials provides you with a team of experienced professionals that help you achieve your financial goals through smart tax structures and strategic structuring.

Book a financial health review to see the difference we can make in your financial future.

Disclaimer

This outline is for general information only and not as legal, tax or accounting advice. It may not be accurate, complete or current. It is not official and not from a government institution. Always consult a qualified professional for specific advice tailored to your unique circumstances.

Contact us today for a consultation.

Contact us today to learn more about how our accounting services can benefit your business. We look forward to hearing from you and helping you achieve financial success!

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