Sydney Harbour Bridge. Image Christopher Burns.

Estate Planning Questionnaire

Capital Protection

Capital protection is one of three key areas in law that Cleary Hoare Solicitors specialise in. To us, Capital protection means ensuring that the wealth which clients accumulate is being generated in a flexible environment, secure against misadventure or litigation; and structured so that wealth and control will pass to the right people in the next generation.

Capital Protection starts with advice on structuring and the use of key criteria to ensure clients are operating or accumulating wealth in the correct structure. Where analysis of a client shows that assets are not protected, we can deliver strategies to protect those assets from risk.

Capital protection also incorporates growth of the client, whether that be by way of capital raising, structuring the business for introduction of new participants, governance, shareholder, unit holder or partnership agreements; or preparing a business for sale, whatever the type of business.

Asset Protection

In an increasingly litigious environment, many of our clients are concerned about asset protection.  Typically they want to ensure that:

  • Their assets are protected from attack from their creditors, bankruptcy or divorce

  • Their personal and business assets are protected for future generations

  • The assets they pass to their children are protected from creditors, bankruptcy or divorce of their children

When considering asset protection, a simple but valid principle to live by is the old saying, "Don't have all your eggs in one basket".  We always recommend that clients should quarantine separate types of assets in separate entities.

It is often the case however that assets are accumulated by clients either in unsuitable structures or in personal names which exposes those assets to risk. Once those assets are acquired; the cost to take a traditional approach and transfer those assets to something else can become too costly due to Capital Gains Tax or stamp duty liabilities.

One of the highest levels of asset protection that can be provided to a client is to own assets in a fully Discretionary Trust. This is because the courts have long recognised that a beneficiary of a purely Discretionary Trust does not have a defined or contingent interest in any of the Discretionary Trust's assets, even though that beneficiary may control the Trust. Therefore, if a beneficiary is attacked by creditors, becomes bankrupt or is divorced, in most circumstances the Trust assets will not be at risk.  It is for this reason we often use Discretionary Trusts when undertaking asset protection work for clients.

Cleary Hoare have further enhanced the asset protection values of a Discretionary Trust by developing the Bloodline® Trust. At the request of a number of cane farmers, our involvement in the rural sector saw the development of the Bloodline® Trust that would deliver robust protection of their land and assets when it passed to the next generation. The Cleary Hoare Bloodline® Trust has helped hundreds of families and businesses protect their assets in a tax effective manner.

The essential features of a Bloodline® Trust are:

  • It is a fully Discretionary Trust 

  • The rules of the Bloodline® Trust categorically provide that the capital (assets) of the Trust can never go outside the bloodline during the life of the Trust  

  • It allows income to be spread amongst in-laws (eg children-in-law, grandchildren-in-law) but the rules very strictly provide that capital must stay within the bloodline

  • If the transfer of assets to a Discretionary Trust becomes too costly due to Capital Gains Tax or stamp duty liabilities, other strategies can be adopted which will achieve a comprehensive level of asset protection but without any tax cost. 

Image by Christopher Burns

OUR CAPITAL & ASSET PROTECTION LAWYERS