Estate planning is designed so that your hard won assets are controlled in a way that you choose in case of incapacity and death and to protect against claims either from family members or creditors.

1. Website: www.caticlan.com.au
Suite 1, 710 High Street Rd, Glen Waverley Tel: 9886 1481
PROTECTING YOUR ASSETS
Professionals, particularly those on high risk pursuits, such as medical practitioners, should seek advice from an appropriately experienced professional about estate, succession and wealth planning. These days it is no longer a matter of making a simple husband and wife Will. Second marriages, step-children etc. can give rise to complications and claims against deceased estates. With proper advice and planning the risks of something going wrong following death can be minimized.
Estate Planning
Estate planning involves planning for control to ensure that your wishes are carried out. Assets are commonly held in structures such as family companies, family trusts and superannuation funds. These assets will not form part of your personal estate governed by your Will.
With proper advice, either when contemplating buying an asset or considering what is to happen to existing assets, you can plan whether it is better to own the asset personally or to hold it in a different entity. An estate plan will also deal with what is to happen to the asset following your death.
Estate planning can also ensure that control of assets and your person is maintained according to your wishes in the event of an unplanned event during your lifetime such as sudden illness or accident which renders you incapacitated. Properly drawn Enduring Powers of Attorney and Appointments of Enduring Guardian can assist in having your wishes fulfilled under these circumstances.
Asset Protection Planning
Asset protection planning is the legitimate process of structuring your personal and business estates so they are secured from potential creditors in the event of an unplanned financial catastrophe.
If you have worked hard to build up your assets for your family and your retirement, why expose these unnecessarily to creditors when some careful planning, with proper professional advice, can go a long way to protect what you have fought so long and hard to build up? Creditors have wide and powerful abilities to pursue personal assets. Changes to bankruptcy and family law have increased the power of creditors. Successful planning goes a long way to redress this bias towards creditors in a legal and moral manner.
The critical issue with asset protection planning is to do it before a claim arises. It is often too late when a problem is known about or is looming over the horizon.
Bankruptcy
An individual who is unable to pay his or her debts as and when they fall due can be made a bankrupt. The creditor may, for instance, be the Australian Tax Office or the person or entity who has won a court case against you. Bankruptcy is a process designed to allow the bankrupt person’s financial affairs to be put in order to allow their creditors to be paid.
Bankruptcy generally lasts for 3 years following which the person is released from debts due to creditors (apart from some exceptions eg. child maintenance payments) from the date of bankruptcy. The Trustee in whom the bankrupt’s property vests is usually The Official Trustee in Bankruptcy (Trustee) which is a government body that administers the operation of the Bankruptcy Act, 1966 (Commonwealth) (the Act). Any property acquired by the bankrupt after the date of bankruptcy and before discharge will vest in the trustee e.g. an inheritance.
Bankruptcy commences at the time of the earliest act of bankruptcy committed by the bankrupt within the 6 month period preceding the date of presentation of the creditor’s petition.

2. Website: www.caticlan.com.au
Suite 1, 710 High Street Rd, Glen Waverley Tel: 9886 1481
Claw Back and Avoidance Rules
These are the critical issues when planning for asset protection. They will not be relevant at all if proper planning has been implemented. Planning done at the time of financial distress is almost certain to be ineffective and too late.
The Act allows the Trustee to challenge certain pre-bankruptcy transactions and, if successful, to have the transactions set aside and then to recover money and property disposed of by the bankrupt prior to the bankruptcy. Undervalued transactions and transfers to defeat creditors such as by the bankrupt to a family company trust or superannuation fund could be caught.
Section 120 of the Act is the most troublesome from an asset protection perspective. The time frames must be strictly observed if a successful asset protection plan is to be implemented.
Transfers of property made by a person who later becomes a bankrupt for no consideration (e.g. gifts) or for less than market value consideration can be set aside by the Trustee if the transfer is made:
• during the 4 years prior to the person becoming a bankrupt; and
• up to 5 years if the bankrupt was insolvent at the time of the disposal.
• these 4 and 5 year periods may be extended by a further 6 months because of the ‘relation back’ provisions in the Act.
Transfers to Defeat Creditors (Fraudulent Dispositions)
The Act provides that a transfer made by a person who later becomes a bankrupt with a view to defeating creditors is void irrespective of when the disposition is made.
The Trustee must prove that the main purpose in making the transfer was to avoid the transferred property becoming available to his or her creditors or to hinder or delay the process of making the property available to creditors. This is so even if the person proves they were solvent at the time and had no creditors at that time. The Act allows some inferences to be drawn in certain circumstances that the main purpose was to prevent the property becoming available to creditors etc.
If successful, the Trustee can require the property to be transferred to him or her.
Asset Protection Strategies
The best asset protection strategy is to shelter assets against potential adverse transfer claims before you have creditors. A proper estate plan will look at how this can be achieved. It is critical to have such transactions properly documented and recorded.
Professional Indemnity Insurance
It is very important that any professional has Professional Indemnity insurance cover with an insurer that has a strong balance sheet and which will be in a position to honour their insurance contracts as claims can arise many years after the event.
Summary
Proper and effective estate planning need not be an expensive exercise. There is no need to enter into complex and expensive schemes. The key is to plan early before something happens. Estate planning is designed so that your hard won assets are controlled in a way that you choose in case of incapacity and death and to protect against claims either from family members or creditors.