When deciding on the asset protection strategy to use have you considered:
- Are you increasing your wealth? Do you want that wealth protected for the next generation
- Are you interest in flexibility and income streaming
- Would you accept a tax benefit if the structure permitted it
The above parameters are the minimum we look for when determining the appropriate structure to acquire assets under your wealth creation strategies.
The Australian discretionary trust provides the above parameters and generally is easy to establish and use. The broad pool of beneficiaries provide the asset protection for an individual beneficiary under the deed. Should a litigator try to take action against a beneficiary for the assets of the trust, they cannot succeed because the beneficiary is not presently entitled to any income or capital of the trust.
Instead it is up to the discretion of the trustee which of the beneficiaries will receive distributions of income or capital from the trust. The assets of the trust do not belong to the trustee but are rather held on behalf of the beneficiaries.
Therefore holding wealth in trusts and keeping control of the assets under your role of appointor means you can use a Ferrari but you don’t have to own it!!
As a result of the Bamford Case, the Government has legislated on streaming capital gain and franked dividends to beneficiaries rather than the income all being lumped under an income definition. This means that the trustee can be more selective of which beneficiary will receive a capital gain or franked dividends. This allows more flexibility than if you as the investor acquired the investments in your own name, or in a more restrictive environment, a company.
We rarely structure for taxation as the laws can change, rendering the model ineffective, however there are still many strategies that we use with our consulting clients and coaching clients to minimise their overall taxes as much as possible.