Asset protection

[juliezzz]

I'm going to purchase a new PPOR soon. Can pay cash.
Want to invest in a couple of IP's over the next couple of years. Am average PAYG but have good equity 'bout $1M.
Boyfriend (of 7 yrs not defacto) and I plan to move in together in 4-5 yrs. His net worth = negligible $50K. Self employed.

Obviously I would like to protect my assets for my children. Thinking about a trust and purchasing new PPOR in same. My broker advised that getting loans to purchase future IP's (positively geared) in a Family Trust would be problematic ie too hard. No problem if in own name. Can I put PPOR in trust and IP's in trust. Is it worth the hassle and fees?

Any feedback on prenups and how useful they are? Even if I pay all of the mortgage in future years myself, if we separate and my defacto becomes unemployed/dependant - can he claim financial dependency etc to gain a % of my property?
Am I doomed to live alone eternally to protect my a$$ets ad infinitum and is it worth it? Don't mean to be a pessimist - it's just like insurance.

 

[Piston Broke]

Only an opinion
Prenup will cover existing assets, and a trust that is positive geared could offer some future protection.
Once your married or defacto, all assets acquired after will likely end up 25/75 (yep the bloke gets 25 even when he pays for everything).

 

[MIW]

Set up correct investment structure at the start!

I'm going to purchase a new PPOR soon. Can pay cash.
Want to invest in a couple of IP's over the next couple of years. Am average PAYG but have good equity 'bout $1M.
Boyfriend (of 7 yrs not defacto) and I plan to move in together in 4-5 yrs. His net worth = negligible $50K. Self employed.

Obviously I would like to protect my assets for my children. Thinking about a trust and purchasing new PPOR in same. My broker advised that getting loans to purchase future IP's (positively geared) in a Family Trust would be problematic ie too hard. No problem if in own name. Can I put PPOR in trust and IP's in trust. Is it worth the hassle and fees?

Any feedback on prenups and how useful they are? Even if I pay all of the mortgage in future years myself, if we separate and my defacto becomes unemployed/dependant - can he claim financial dependency etc to gain a % of my property?
Am I doomed to live alone eternally to protect my a$$ets ad infinitum and is it worth it? Don't mean to be a pessimist - it's just like insurance.

I suggest you see a good estate/asset protection lawyer and an IP accountant. A pre-nup would be a must.
Trusts structures are good for asset protection/estate planning but there are some limitations: more costly to setup and run, no negative gearing allowed to off-set your IP's, lower/different land tax thresholds, subject to capital gains if you sell.
PPOR would be exempt from capital gain and land tax and IPs held in individual names have sometimes higher land tax thresholds (eg QLD $600K individual and $350K per trust).
I would suggest you figure out a plan of what you wish to buy and where, how many investments you wish to have and when you plan to buy them (or a $ figure), you should adopt a strategy. Ours was to have $2mill so we could have $50K in income. Then discuss with a good IP accountant on the structure best suited to your circumstances.
When hubby and I started we didn't know this so now we have IPs bought under 4 structures (jointly, trust, super, PPOR - just in my name). I cannot stress how important is to set up CORRECT INVESTMENT STRUCTURE at the start, before investing, otherwise it can then cost you lots $ for chaning it later on.
P.S. Never give up on love!

 

[Piston Broke]

Trusts structures are good for asset protection/estate planning

After the "union" anything purchased in trust will not make much difference.

 

[wylie]

Once your married or defacto, all assets acquired after will likely end up 25/75 (yep the bloke gets 25 even when he pays for everything).

That split is just not right. It is not a "one size fits all" thing, even if some people here believe so. Go to a good specialist family lawyer who has taken these things to court, and you will get a good idea of what sort of percentage split up is probable in your particular circumstances.

Another thing I learned when I went to such a lawyer (as support for someone else - not my marriage) was that having assets in a trust doesn't mean the other party cannot get their share of that too. The Family Law Court apparently has more power than we think.

 

[Peter_Tersteeg]

There's nothing difficult about setting up a loan and purchasing properties in a family trust. It's a couple of extra forms, a few extra dollars (you'll be required to get legal advice on the contract) and about an exta 10 days processing time. More likely that your broker only has a limited understanding of how trusts actually opperate.

Having said that, a trust will only provide limited asset protection in the case of a separation. Courts have been known to take a quick look at who's been benefiting from the trust, then simply take the assets based on the benefits.

The best protection you've got is choosing who you spend your life with very carefully and making the right decision, not a quick one. It's impossible to give advice here, but look objectively at your relationship and decide if all the pieces of the puzzle really do fit properly.

 

[Rolf Latham]

My broker advised that getting loans to purchase future IP's (positively geared) in a Family Trust would be problematic ie too hard. No problem if in own name.

That right there would cause me to look for a new broker because

1. That statement is in general not true
2. Your broker either lacks in a breadth of experience, or dwells mainly in the PPOR loan world
3. They dont care about your needs
4. They care more about their comfort and convenience over your stated need for security


Now, having said all that, because I know nix of your details, that broker might be right because you have odd lending resources / criteria.

ta

rolf

 

[Terryw]

I'm going to purchase a new PPOR soon. Can pay cash.
Want to invest in a couple of IP's over the next couple of years. Am average PAYG but have good equity 'bout $1M.
Boyfriend (of 7 yrs not defacto) and I plan to move in together in 4-5 yrs. His net worth = negligible $50K. Self employed.

Obviously I would like to protect my assets for my children. Thinking about a trust and purchasing new PPOR in same. My broker advised that getting loans to purchase future IP's (positively geared) in a Family Trust would be problematic ie too hard. No problem if in own name. Can I put PPOR in trust and IP's in trust. Is it worth the hassle and fees?

Any feedback on prenups and how useful they are? Even if I pay all of the mortgage in future years myself, if we separate and my defacto becomes unemployed/dependant - can he claim financial dependency etc to gain a % of my property?
Am I doomed to live alone eternally to protect my a$$ets ad infinitum and is it worth it? Don't mean to be a pessimist - it's just like insurance.

Hi Julie

Consider gifting the $1mil to a discretionary trust and then you as an individual borrowing it back to purchase your PPOR. Buying in your own name will mean you lose the land exemption and CGT exemption and this could be costly. Using this gift and borrow back strategy will add to asset protection, especially after 5 years or so, if you get sued. So this is good asset protection if you suffer bankruptcy (and it is set up and run well).

The family law act allows orders to be made on third parties such as trustees. The trust would be a resource of yourself and its assets taken into account in any property settlement. There is a recent case where a trust specialist and barrister lost to his wife and trust assets existing before the marriage can now be taken into account - kennnon v spry.

You also have to consider asset protection in death. Trust assets do not generally, form part of your will. So someone challenging your will, such as a family provision claim, will not, generally, be able to get at the trust assets. You can leave control of the trust and its assets via the deed and the role of the appointor.

Prenups are good and are enshrined in the family law act. They can be done before, during or after the marriage. However, they there effectiveness can diminish if your circumstances change - such as children being born etc.

When making orders the family court can look at a number of things such as who contributed what (initial money, ongoing loan payments bill payments etc and no financial contributions such as painting the letterbox etc) values, assets and resources of the parties, their needs etc. So having purchased the place, basically, yourself would assist you, but he would likely to be awarded a large chunk, especially if your resources (incl trusts) were much greater than his.

Everyone assumes (or most men) that the family law situation is biased towards the woman, but I am not sure this is the case now. I think it may be biased towards the party with the lower resources though. So someone could get back more than they put into the marriage.

 

[Piston Broke]

That split is just not right. It is not a "one size fits all" thing, even if some people here believe so. Go to a good specialist family lawyer who has taken these things to court, and you will get a good idea of what sort of percentage split up is probable in your particular circumstances.
.

I have a relative who has been a family court specialist for many years.
The bloke works, pays, the woman whinges and is always the victim.
The system is very biased towards women, with a few exceptions.
These being the woman has assets and the man none or little.
The woman is the main earner, and he is not.

The far majority of cases is that the man earns the income, so he loses out.
Just because a few women on this forum wear the pants does not mean it's the norm.

 

[wylie]

I know several women left with nothing and renting. Others with 55/45 split even with three kids, both cases where husbands have been "creative" with income, hidden assets etc.

For every man "done over" you will find a woman "done over".

We'll just have to agree to disagree.

Things are changing from the old days and old judgements.

 

[lizzie]

great advice ... I couldn't get much further than the "7 years together" and will move in together in "4/5 years time"!

Wow - that's a long time testing the waters ...

 

[Piston Broke]

There is a recent case where a trust specialist and barrister lost to his wife and trust assets existing before the marriage can now be taken into account - kennnon v spry.

Common mate your a lawyer and should know it's a little more complicated than that.
And i dont think you really read that judgement, maybe it came on a "laywer's news flash" as ammo to scare thier clients with.
Such a conclusion is misleading and without warrant.
The few hundred K in the trust before marriage were taken into account.

 

[Terryw]

Common mate your a lawyer and should know it's a little more complicated than that.
And i dont think you really read that judgement, maybe it came on a "laywer's news flash" as ammo to scare thier clients with.
Such a conclusion is misleading and without warrant.
The few hundred K in the trust before marriage were taken into account.

Of course it is more complicated then that.

 

[Ajax]

Have worked as a family lawyer in the past.

Not so sure how the Family Court is splitting assets derived during the marriage these days.

Assume it is similar to when I was practising in this area. Start at 50/50 with concept that husband and wife's financial and non-financial contributions to a long term marriage would usually be equal. Then adjust for wife's future income earning ability vs husbands, whether one party has greater care of children into the future, health of eiach party etc.

My point is that although working husbands can feel done over in the asset split by their non-working wives studies have shown that 2 or 3 years down the track the working husband is often in a stronger financial position...particularly if the wife has never worked during the marriage (despite the asset split favouring her at time of Family Court orders).

For an unusual case...reverse the situation...go getter businesswoman wife and househusband who has cared for 3 children for last 10 years. The split would favour the househusband as his ability to earn an income in the future is not as strong as the wife.

 

[cu@thetop]

I'm going to purchase a new PPOR soon. Can pay cash.
Want to invest in a couple of IP's over the next couple of years. Am average PAYG but have good equity 'bout $1M.
Boyfriend (of 7 yrs not defacto) and I plan to move in together in 4-5 yrs. His net worth = negligible $50K. Self employed.

You sound like a good catch. If this boyfriend thing doesn't work out let us know.

PS- pre nup is your best way to go; but I must ask how did you come about such money- and if you are self made how does it sit with you that in the 7years you have been with your boyfriend he has not accumulated significant wealth?

 

[Brett IP]

Boyfriend (of 7 yrs not defacto) and I plan to move in together in 4-5 yrs. His net worth = negligible $50K. Self employed.

Your certainly a long term planner .

As cu@thetop was asking, and out of curiosity, is the main reason for a prenup/protection due to the fact that it has been 7 years, you have managed a great accumulation of wealth, whereas your partner seemingly hasnt (in comparison to you)?

After 7 years I would have thought it would be joint wealth with joint goals.

 

[pennyk]

great advice ... I couldn't get much further than the "7 years together" and will move in together in "4/5 years time"!

Wow - that's a long time testing the waters ...

Juliezzz, I've been trying to decide whether to write my thoughts on this topic... my hesitation is because your relationship is your business and I dont know you or the situation. So, I'll try to tread gently, and I hope you are not offended. If you are, just ignore what I say!
Like Lizzie, I'm concerned that the relationship is going so slowly.... and like others have said, the fact that after 7 years together, your wealth levels are so different. I guess if you had an inheritance or won the lottery, I could understand it... or if he has invested alot of money into his business. There are alot of perfectly valid reasons.
But I do get the feeling that you may be headed in different directions or have very different philosophies in relation to money/wealth. That may be OK now, but as you continue in the relationship, it will become more and more difficult.
I hope that he's not just "comfortable" to take a back seat, and go with the flow of your wealth. Even with the length of time of the relationship, it sort of sounds like he's happy to just enjoy the fruits of your labour, but not make a commitment. I would want to make sure he's contributing financially to the relationship now, so that you have confidence in that aspect of your relationship.
So, I could obviously be totally off the mark, and I would be very happy if that were the case. I'm not saying you should only have a relationship with someone on equal footing to you.... (when hubby and I started dating, he was dirt poor and I supported him for the first few years of marraige while he finished uni...... but we were heading in the same direction. He needed to get qualifications in order to be able to develop a viable career, so it was worth the short term pain)

But if you have any doubts in the relationship, I would suggest having a break, and seeing how you feel in a few months time. Sometimes a break can help to clarify whether this is really someone you want to spend your life with.