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An asset protection trust (aka equity split) does not give you 100% protection but it helps.
Asset Protection Trust
Last week in episode 397 Asset Protection Layers we already touched on asset protection trusts aka equity strips as the fifth layer of asset protection. In this episode, Andrew Andreyev of ADLV Law in Sydney and Adelaide will drill deeper into this with you.
Here is what we learned but please listen in as Andrew explains all this much better than we ever could.
To listen while you drive, walk or work, just access the episode through a free podcast app on your mobile phone.
Asset Protection Trust
An asset protection trust is a trust that holds a charge over your assets. Be it a mortgage over your properties and/or a PPSR registered interest over your other assets.
PPSR stands for Personal Property Securities Register.
Mortgage
A mortgage is not a loan. It is just a security interest over a specific item of real estate to secure a loan, attached to the title of that real estate.
If you want to secure an asset in Australia that is not real estate, you register an interest in the PPSR, either an ALL PAAP or a PMSI.
ALL PAAP
A common charge in the PPSR is an ALL PAAP. A charge over all present and after-acquired property. An ALL PAAP charge covers all your property or your entity’s property.
So if your asset protection trust holds a charge over your assets, then it is much harder for your creditors to attack those assets. The ALL PAAP or mortgage protects your assets.
PMSI
The alternative to an ALL PAAP is a PMSI. A PMSI is a specific registration for an interest in a specific item for all or part of its purchase price.
Proper Documentation
All these charges though, be it a mortgage, an ALL PAAP or a PMSI, don’t really work unless the asset protection trust and the charge are properly documented. It all depends on getting your papers in order. A lot of the court cases that pierced through an asset protection arrangement succeeded thanks to poor documentation.
Not 100%
As mentioned in this episode, an asset protection trust (aka equity split) doesn’t give you 100% protection, but it increases it. The more layers you use, the better protected you are.
But please listen to this episode since this is just a very short summary of a few points we discuss in this episode. Andrew Andreyev covers a lot more that we didn’t write down.
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Disclaimer: Tax Talks does not provide financial or tax advice. All information on Tax Talks is of a general nature only and might no longer be up to date or correct. You should seek professional accredited tax and financial advice when considering whether the information is suitable to your or your client’s circumstances.
Last Updated on 04 October 2024
Tax Talks spoke to Andrew Andreyev - Principial at ADLV Law - for more details.
