�ݺ�ߣ

Editor's Notes

1. Hello and welcome to this special presentation on asset protection and how to achieve it, from OBT Accounting and Tax.
2. The information following is of a general nature only and is not intended to be relied upon, nor to be a substitute for, specific professional advice. No responsibility for loss occasioned to any persons or organisations acting on or refraining from action as a result of any information or material will be accepted. Please ensure you contact us to discuss your particular circumstances and how the information provided applies to your situation.
3. Let’s start by talking about WHAT asset protection is. Asset Protection defines the strategies that may be employed to minimise the risk of losing your financial assets in life as well as death. So WHY is it necessary to think about asset protection? At OBT we see there could be potentially six key areas in which you could be exposed by not having proper asset protection. Let’s look at each one in turn: What we’re seeing is that society has become more litigious, meaning people have become better informed about their legal rights and the ease to which legal action can be taken, sometimes on a “no win, no fee basis”. So in other words there is a greater likelihood of being sued nowadays The safeguarding of personal assets for retirement/succession. If you have a business, you need to think about the succession plan for that business so it is very important that as you move toward retirement or a succession phase, your business assets are separated from your personal assets We see an increased incidence of marital breakdown and mixed marriages e.g. de facto relationships but it is unclear what the rights in those circumstances are and that assets are protected accordingly Taxation is clearly our speciality and the changing, complex taxation laws may mean deficiencies exist in business structures which can have significant tax impacts The reluctance of insurance companies to pay out claims, and Sadly there is an increased incidence of bankruptcy.�� A lot of businesses have struggled with the global financial crisis and are still having difficulties now. Bankruptcy is on the rise so, again, you need to ensure that assets are separated so that if your business goes down the tubes, your house is not going to go with it.
4. At OBT we have created three circles, or levels, of protection to ensure that your assets are fully protected: Our first circle of protection has been created: To ensure risk of potential liability is limited and therefore your assets are protected We help you seek expert advice when required, for example, how to maintain the quality of your manufacture, or ensuring working conditions are safe for staff, or other areas which might impact you in a business setting. We work with you to do everything possible to reduce the risk of liability that you may face, and To have appropriate business structures in place to limit liability to the entity most at risk. OBT’s second circle of protection goes a little bit deeper, and then we work with you to make sure you have adequate general insurance cover as many people are under-insured: General insurance to protect your assets Professional indemnity insurance Workcover for your employees and subcontractors Public Liability Insurance Health and life Insurance, and Insurance in case of sickness or accident OBT’s third circle of asset protection is our most comprehensive as we work with you to cover everything in circles one and two PLUS having the entity or person at risk with little or minimal assets. This is often best achieved by the use of appropriate business structures. Let’s find out more about how OBT’s third circle of protection works...
5. I’m sure you’ll agree there is ‘asset protection’, and then there is asset protection. At OBT, as part of our third circle of protection, we have designed these steps to make sure that your asset protection strategy is a thorough one: We evaluate and take steps to minimise the risk of your being sued We separate your assets from areas of risk If you are a business owner, we put into place appropriate business structures We assess and take measures to ensure that proper Estate Planning is in place, for example updating your Will, or appointing an Enduring Power of Attorney If you have not yet decided what the Succession Plan might be for your business, we determine that with you and document an action plan to get the plan in train To make the process comprehensive, we review your Superannuation arrangements, and your Risk Insurance cover for Personal and Business.
6. A great way to illustrate how important proper asset protection is, is to walk you through a case study. We have chosen a typical mum and dad-type business, in this case a cafe, to highlight the key points of protecting assets in a business context: Typically there should be one person ‘at risk’ and the other person at ‘low risk’. For this example we’ll say that dad is the at risk person and mum is the low risk person The nominated ‘at risk’ person – dad – should be the only one, where possible, exposed to potential litigation proceedings should they arise With that in mind, dad being the ‘at risk’ person should not own or control any assets. And their affairs should be structured so that he should not directly inherit any wealth So we structure mum’s and dad’s affairs so that ownership and control of all assets and wealth (where possible) should be held by mum being the ‘low risk’ person in order to protect all of their assets
7. To make an asset protection strategy an effective one, it is crucial that the correct choice of business entity is made. This is usually done in the start-up phase of a business however, if the business has already commenced trading, then a review of that business entity should be carried out prior to financial difficulty or litigation proceedings commencing. Some examples of typical businesses entities which might work in your favour when designing your asset protection strategy are: Discretionary Trust Proprietary Limited Company Unit Trust Hybrid Trust Superannuation Fund Of course the choice of an appropriate business entity depends on numerous factors such as the tax implications, complexity, or cost and benefits to be obtained. You can rely on OBT to talk you through those factors when a decision about your business entity needs to be made. When it comes to asset protection, a general rule of thumb to consider is that trading activities should be conducted by one entity (where little or no assets are held) and assets (such as plant, equipment, land and buildings) should be held by a different entity. This is why planning is the key.
8. Let’s look more closely at one possible business entity and that’s the benefits of a Discretionary Trust for Asset Protection which was top of out list on the previous slide. A discretionary trust: Is a separate legal entity , where Assets can be separated and owned by various trusts depending upon the level of risk or exposure Additional tax benefits exist which can also assist in your wealth creation, and A discretionary trust offers flexibility as to the distribution of income and/or capital - distributions can be made to “low risk" individuals or entities, plus The entity has proven useful in succession planning efforts
9. Let’s not put too finer point on estate planning, in particular Estate and Wills, as this is an often overlooked area of effective asset protection: Remember, if you are entitled to receive an inheritance then you should be aware that, in the unlikely event of your bankruptcy, your inheritance will form part of your assets available for distribution to creditors. Therefore it goes without saying that planning is important! Illustrating the point in terms of our cafe case study, if these affairs are properly structured, then the ‘at risk’ individual (who you’ll recall was dad) may have little assets left under his Will as his assets become owned by a separate legal entity or by mum being the ‘low risk’ individual. In terms of yourself, your Will should be suitably drafted to ensure that your assets are, too, held by a ‘low risk’ individual and are transferred to a “Testamentary Trust” or a “Discretionary Trust” so that they are not left to the ‘at risk’ individual.
10. Before we let you go, there is one final area which we should discuss before we leave you on the topic of asset protection and that is enduring power of attorney. As you now know, it is extremely important for the individual owning or controlling assets to become the ‘low risk’ individual. However, in the unlikely event that an individual becomes incapacitated, then the Public Trustee will be appointed. That being the case, the remaining individual will be disadvantaged and, on top of all of that, will have to deal with the Public Trustee. So OBT’s general advice in these circumstances is, for Asset Protection purposes, an Enduring Power of Attorney is a real necessity.
11. Asset protection is just one part of the OBT’s Building Blocks™ when it comes to organising your business and personal financial affairs. As you can see, it is a crucial part of the assistance that OBT offers in order to get your affairs in order. That’s probably why we place it first on our list of areas to cover.
12. OBT offers well-planned business strategies to help you to build your financial security.�� On this final slide we have provided our details should you wish to contact us. We look forward to hearing from you if you have concerns about protecting your assets, or if you would like a second opinion on your current asset protection strategy. Thank you for listening. This has been Colin Dunn for OBT Accounting & Tax.