When considering asset protection from creditors, early planning is key.
Where you are being sued or have had a judgement levied against you, transferring your assets to a related person or trust or placing a mortgage by a related party over those assets is unlikely to be effective against preventing recovery by creditors. It may even be criminal!
If you do gift or transfer your assets out of your personal name, and then have insufficient assets to pay your debts, one or more of your creditors are able to apply to the Court for an order for you to be made bankrupt.
The Bankruptcy Act (Cth) empowers the Trustee in Bankruptcy with
the ability to unwind gifts and transfers of property (including money) undertaken by the bankrupt where those gifts or transfers occurred within four years of the date of bankruptcy. Where the transfer or gift occurred five years before the bankruptcy order being made and the bankrupt cannot prove they were solvent at the time of the transfer or gift, the time period will be extended to five years. If, however, the transfer is to defeat a creditor, the transfer will be void against a trustee in bankruptcy.
In effect, the Trustee in Bankruptcy can 'clawback' any gifts or transfers made by you in an effort to protect your assets up to five years prior to your bankruptcy. After that time period, the transfer or gift will be 'safe' from recovery.
For these reasons, we recommend client's consider asset protection early. Additionally, any asset protection being undertaken involving gifts of property should include proper documentation confirming the client was solvent at the time the gift was made.
If you have concerns about asset protection (even if you're being sued!) please get in touch with one of our specialist asset protection lawyers.