Asset protection: when to be concerned and what to do

The last thing you want to happen is that you work hard throughout your whole career, invest successfully and then lose a large amount of your wealth due to an unexpected event. Therefore, asset protection is just as important as asset accumulation. Asset protection is a subject that most investors fail to consider, don’t get good advice on and/or take the wrong advice. The goal of this blog is to give you an overview of the key risks people typically need to consider and what to do about them.Be careful who you ask for adviceOver the past few months I have come across a few people that have paid a lot of money (over $5,000) to lawyer or accountant for asset protection advice. In every case, they ended up with a complex and convoluted structure which they arguably didn’t need.My advice is simple. Get independent advice before paying anyone a lot of money for asset protection advice. Someone is independent when they have no asset protection services to offer you other than their advice. Independent financial advisors are typically the best source of advice as they rarely set up structures (such as companies and trusts) or provide legal services. That is, they have no vested interest in the advice given.Asset protection risk: Self employedIf you are self-employed, you might be exposed to additional risks. There are two important points to consider:§ Firstly, your risk is that you get sued. You must ensure that you have the correct business insurances in place including, product liability, warranty and indemnity, business interruption, WorkCover insurance, professional indemnity, public liability and so on. Also, you must ensure that your business is structured correctly so that your liability is limited (e.g. trading company with the shares owned by a discretionary trust). Make sure that you don’t leave any retained profits in the trading company – the company must have as fewer assets as possible.§ Secondly, typically, there are only two risks that directors of companies can be held personally liable for being; trading whilst insolvent and not maintaining a safe workplace. Therefore, if you are a director of a trading company make sure you receive up-to-date financial reports and if you don’t understand them, ask questions or get advice. If your business maintains a higher risk workplace (e.g. manufacturing, construction, etc.), make sure you are confident that you are maintaining a safe workplace.Asset protection risk: Occupational risksIt is true that certain occupations carry a higher level of risk. A good example is obstetrics because an error or mistake whilst practicing could result in a lost life. Even so, it is important to consider the depth and history of professional indemnity insurance cover. This cover is typically very deep, and the experience of personal loss is very limited – almost non-existent – even for the highest risk occupations. The most likely situation where personal loss could be experienced is if one’s actions were considered ‘criminally negligent’. Therefore, if you conduct yourself in a prudent and professional manner it is probably unlikely that you need to be concerned about suffering loss because of your occupation.Asset protection risk: Property investorsProperty investors could be exposed to additional risks such as a tenant or guest suffering an injury whilst attending your property. Also, certain properties carry higher rMy new book is available for pre-order now: Pre-ordering the book will help me get it into bookstores. So please do me a favour - please consider pre-ordering now - links and pre-order bonus are available here: https://prosolution.com.au/book-preorder-bonus Do you have a question for the podcast? Email us at [email protected]. If you're interested in working with our team and me, discover how we can work together here: https://prosolution.com.au/family-office-servicesIf this episode resonated with you, please leave a rating on your favourite podcast platform. Subscribe to my weekly blog: https://prosolution.com.au/stay-connected IMPORTANT: This podcast provides general information about finance, taxes, and credit. This means that the content does not consider your specific objectives, financial situation, or needs. It is crucial for you to assess whether the information is suitable for your circumstances before taking any actions based on it. If you find yourself uncertain about the relevance or your specific needs, it is advisable to seek advice from a licensed and trustworthy professional.