Asset protection is important for everyone, but is particularly important for professionals who may be exposed to professional negligence claims and entrepreneurs who may be exposed to substantial business risks.We believe that, for at risk individuals, asset protection is far more important than tax planning or wealth creation. It is far easier to lose a fortune than it is to make one, so in many cases where one must make a choice where asset protection conflicts with tax planning or wealth creation, depending on the amount of risk the individual faces, it may be a better idea to favour the approach that leads to superior asset protection.
There are many issues that have increased the focus on asset protection, including:
- insurance company failure in the area of professional liability and public indemnity;
- changes in taxation and family law that may have implications for asset structuring and ownership;
- market downturns that have increased the incidence of insolvencies;
- increasing rates and cost of litigation;
- directors, executives and small business owners are increasingly open to legal action from employees affected financially as a consequence of workplace dealings;
- professionals and sole traders (including tradespeople) can face huge claims under liability and professional negligence law, and may be personally liable for business debts;
- property owners, motorists and those who employ domestic staff such as cleaners and gardeners may also be at risk of claims against them;
- infamous cases of individuals who exploit the rules of the bankruptcy act, and legislative reform attempting to end such abuses.
Asset protection is a complex area, because the subject is interrelated with many other aspects of financial planning. Asset protection strategies may complement taxation, estate planning, social security and family law strategies, or, just as often as not, they may be at odds with one another. Sometimes you may have to make a choice about which factors are more important and accept what may not always be an entirely satisfactory compromise.