At a high level, Asset Protection is the purposeful application of strategies to keep assets out of harms’ way e.g. a lawsuit or a challenge to a Will. These strategies can be employed both during and after a lifetime. In fact, for many of our clients, Asset Protection forms a key part of our strategic Estate Planning advice, and where we work in close tandem with our clients legal advisers.
A solid Estate Plan will ideally be as bulletproof and as watertight as possible. Where it is true that all Wills can be challenged, it is important to remember that the Will only captures personally held assets. Put it another way, if there are no personal assets, it’s much harder to mount a challenge. In fact, Kerry Packer who was one of Australia’s wealthiest men at the time of his death passed away with just $6,500 in his Estate. Michael Hutchence of INXS left less than $1,000 in his Will.
Why is Asset Protection so important for our clients when it comes to Estate Planning?
Simply, it’s to protect a lifetime of hard-earned assets and quite often – a family’s wealth will span generations. Most of us have heard of the saying; “The first generation makes it, the second generation spends it, and the third generation blows it.” Or, as the 19th Century British used to say; Clogs to Clogs in three generations!
At Bastion, we advise inter-generational family group clients to help prevent exactly this.
As much as we need to focus on the desired outcomes of any Estate or Succession Plan, we also need to focus on the heirs themselves.
Spendthrifts are one reason. An American study reported that it takes on average 19 days for a beneficiary of an inheritance to buy a new car. Focusing on financial literacy and money skills of the next generation is a great place to start, but further attention to detail is required for “at risk” beneficiaries.
At risk beneficiaries include those (but not limited to) who are business owners, have gambling or other addictions, or who have relationship troubles – and where solid Asset Protection strategies are warranted by their benefactor. Failure to do so could mean that family wealth is exposed to the risk of a lawsuit, a divorce or in some extremely sad cases, the wealth could fuel an addiction as it is wasted away.
Seeking professional Advice is key, and where Bastion works closely with our clients’ legal advisers to develop strategic asset protection ‘walls’ in an Estate Plan.
Structures such as Discretionary Trusts bring asset protective qualities in that they are a separate legal entity to the individual, and the assets that sit within them are not captured by a Will. The passage of control however to the next generation is something that can be captured in a Will.
Where Discretionary Trusts are inter-vivos Trusts i.e. they are created and operated during a life-time, Testamentary Trusts are formed after the death of the grantor, and are governed by the provisions of the Will. Testamentary Trusts carry asset protective (and tax effective) qualities to beneficiaries; think marriage breakdowns, lawsuits, spendthrift beneficiaries and can be a very relevant Estate Planning tool for that reason.
Superannuation benefits – where foresight and careful planning is afforded – can also bypass the Estate and go straight to the intended beneficiary. Remember, it is the Estate that can be challenged.
Ordinarily speaking, superannuation monies (along with any insurance proceeds) are also protected under the Bankruptcy Act – a very important asset protection overlay for certain types of clients and their beneficiaries. There is no such thing as a one-size fits all Estate Plan or Asset Protection plan. It needs to be tailored to every family, indeed every individual – heirs included – and why professional Advice across both your Financial Adviser and Legal Adviser is key.
Naomi Mee-Martino CFP® is a Financial Planner and Director with Bastion Financial Group.
Bastion Financial Group specialises in investment management and holistic financial planning advice to high net worth families, professionals and business owners. We utilise asset allocation, proven research based methods, a focus on education and decades of experience to help clients minimise the risk and stress of creating and managing wealth. We are Certified Financial Planners and active members of the Financial Planning Association of Australia (FPA). Our Advisory team can be contacted on;
Naomi; naomi@bastionfinancialgroup.com.au or (08) 6225 5150 or 0413 917 698
David; david@bastionfinancialgroup.com.au or (08) 6225 5150 or 0407 770 782
Important information
This article has been prepared by Bastion Financial Group Pty Ltd., Authorised Representative(s) of Godfrey Pembroke Group (ABN 38 078 629 973), an Australian Financial Services Licensee, registered office at Level 2, 26 Brisbane Avenue, Barton ACT 2600.
Any advice in this document is of a general nature only and has not been tailored to your personal circumstances. Accordingly, reliance should not be placed on the information contained in this document as the basis for making any financial investment, insurance or other decision. Please seek personal financial, tax and legal advice prior to acting on this information.
Opinions constitute our judgement at the time of issue and are subject to change. No member of the Godfrey Pembroke Group, nor their employees or directors, gives any warranty of accuracy, nor accepts any responsibility for errors or omissions in this document.
