Ownership Structuring and Asset Protection
Ownership of your personal assets will vary based on your family’s circumstances however where one partner is a director of a trading company or works in a regulated profession which carries professional liability, then it is often best for personal assets such as the primary home to be owned by the partner that is not exposed to the same risks.
Where both partners have a similar risk profile it may be best that the personal assets are owned in a trust, which the beneficiaries would then have a right to occupy.
Ownership structuring is a complex area and one you should discuss with a Cashel House Adviser or lawyer.
A trust is a very common holding entity to establish and use. Generally, it is used to hold assets on trust for the trust beneficiaries.
Trusts have the advantage that they can collect income from the investments and assets that they own, and then distribute it to beneficiaries in a way that is tax effective for the beneficiary’s subject to their personal tax rates. Earnings within a trust must be distributed each year, to those beneficiaries nominated prior to the end of each financial year.
You may establish a company to operate a business that has material commercial opportunities and liabilities. Unlike a Trust, a Company is taxed, and that tax is applied at the Company tax rate. It can choose to retain any profits and distribute them in the form of dividends. Additionally, it can accumulate losses which it may offset against future profits.
You would establish a Special Purpose Vehicle (SPV) where you would like it to own an active asset such as a Company or Development that you expect to sell. Establishment of a Special Purpose Vehicle enables you to sell the underlying assets and limit any recourse associated with those assets to the SPV rather than passing it back to your main asset holding entities.
A self-managed super fund (SMSF) has several advantages over a retail super fund, however many of the advantages are not used or not appropriate given the development of cheaper platform technology.
A self-managed super fund enables you to have up to 5 members of a fund, this includes members that are under the age of 18, it also enables you to invest in any type of asset including direct real estate. A SMSF however is very costly compared to a retail super fund and unless you are determined to own direct real estate in it, there is the potential for your retirement to be negatively affected due to unnecessary costs.
With the current cost of real estate (in the context of real wages), parents are often providing funds to children via way of a gift to purchase a property. However, given the rates of divorce and litigation, these gifts often become common assets that a marriage or business failure would consume.
A structured gift is where a party, such as parents, would make a documented loan to a child to buy an asset. This loan is normally a registered mortgage like that of a bank loan and is repayable in the case of a family law or commercial dispute. Often where the party providing the loan passes, the loan is forgiven.