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Who has Access to your Nest Egg?

Wills & Probate

Don‘t leave the door open on your estate and assets
Senior Associate Anne Goodrick spends much of her time assisting our clients with their estate planning and trust and superannuation structuring. In this article, Anne identifies some of the live issues to be aware of when approaching the important issue of protecting your hard-earned assets.

Much advertising in the financial services sector focuses on protecting your nest egg – that golden asset of value that you have accumulated and hope to continue accumulating for yourself and your family.  The usual aim is to “keep it in the family” – that is away from creditors or “blow-ins”.

Just what is comprised in your nest egg may determine how you ensure your aims are achieved.  It could be personally held property (shares, land and money), property in a trust in which you are (perhaps one of or the main) beneficiary, property/money/benefits held in superannuation, or entitlements flowing from insurance, retirement benefits or court actions.

A critical question to ask about each of these assets is whether they are protected from former spouses, former or current spouses of your children, creditors (both yours and your children’s), or the trustee in bankruptcy for you or your family members. This question is not only relevant in current circumstances, but also just as importantly should circumstances change in the future – especially in the context of relationship breakdown or financial hardship.

Whilst you are alive, removal of assets from personal ownership (after a certain period of time called a claw-back period) is generally effective to prevent creditors or a trustee in bankruptcy (who is the ultimate end of the line when creditors come calling) from taking them.  However this is not always the case – even property held by a family member or trust may be at risk if the “protected” person controls it or made the financial contribution for its acquisition.

Sometimes a structure may be established which is technically sound for asset protection, such as a trust (established in your lifetime), a testamentary trust under Will, company ownership, reduction of share in property, change of ownership structure in property – joint tenancy or tenants in common, or holding assets in superannuation. But even these schemes can fail in operation – usually when the protected person can’t keep out of it and is in effect the controller of the asset.  Others may fail because of timing issues – such as changing the method of ownership of real property in a way that would work if the right person dies first which is thwarted by the earlier death of the “wrong” person.

Superannuation is generally protected from creditors and is therefore a great wealth-building structure. However, contributions made to Super with the intent to defeat creditors will be void as against the trustee in bankruptcy of the person making the contributions. A provision in a self-managed superannuation fund trust deed disentitling a member to an interest in their benefit during the period of bankruptcy is also void.

A particular risk with Super is that on death, benefits may be paid to parties to whom the member would not choose, such as second or other spouses, or children who are estranged.  That can generally be protected against by an effective binding death benefit nomination, but care is needed in making these in proper valid form.

There is no one way of protecting that nest egg.  Your situation is unique, and strategies will need to be tailored to you.  We enjoy working collaboratively with accountants and financial planners to achieve the best outcomes for our clients.