Why Registering Properties In Your Own Name Puts Your Assets At Risk — And What To Do About It
DG Institute Founder Dominique Grubisa explains why investors who have all their properties registered in their own names could actually be putting their assets at risk and why this is a crucial time for every homeowner in Australia to have asset protection strategies in place.
Many of us dream of buying and owning multiple houses. However, very few of us are ever taught about the importance of asset protection strategies for homeowners.
We live in an age of extreme financial uncertainty. New disruptive technologies are toppling once mighty corporate giants, and Blockchain technology seems poised to completely rewrite the way financial transactions are carried out.
On the global stage, the major players seem to be teetering closer and closer to a serious conflict, while in Australia, people are living with record levels of debt. Meanwhile, the recent Global Financial Crisis revealed the underlying instability of the world’s financial systems. Major banks toppled, whole nations went bankrupt, and countless people lost their homes and livelihood. And it could all happen again.
It’s only natural in such circumstances that people should want to protect the assets they have worked so hard to accumulate. They want strategies that will safeguard them from the fickle hand of fate and stop others taking what is rightfully theirs.
The risk of owning properties without having asset protection strategies in place
Unfortunately, many property investors stand at a major disadvantage when it comes to asset protection. Why?
Firstly, while property is a great vehicle to hold and grow wealth, it’s also among the most cumbersome of assets. Unlike shares or cash, property cannot be easily sold or traded in and out of in case of a crisis. As we know, there are also invisible costs like stamp duty, legal fees and other expenses due at purchase or sale time.
Secondly, and most importantly from an asset protection perspective, the ownership of a property is extremely easy to establish. Australia has a ‘Torrens Title’ system of property registration where every single piece of land, or real estate, has a number and is registered in each state with the relevant land titles office. Anyone claiming an interest in a piece of land has to register their interest on its title for it to be recognized. This is why banks will register their mortgage on your title. When the property is sold, all debts on the title must be discharged.
This creates a problem for asset protection. Everyone from property investors to mum-and-dad home owners typically tends to hold the title of the properties they own in their own names. This means that their significant equity in property (the part that they own, free of the mortgage to the bank) is totally exposed to creditors in times of crisis. Anyone pursuing the property owner can try to seize their wealth by registering a caveat on the title to the property they own.
When I was a barrister working in the debt collection industry, the first thing that I looked at with prospective defendants was whether they held property in their name. I was always delighted if one of my potential targets owned real estate. Using publicly available data, I could find out the addresses of all properties they owned, or had an interest in, and how much they owed the bank on those properties.
The safest asset protection strategies in Australia
Savvy investors will always look for ways to protect their assets from creditors in times of crisis. So, what’s the answer? It’s certainly not to become afraid, to freeze up, to sell all our real estate and bury the money in the backyard. But given that most very rich people store their wealth in property, there must be a way to reduce property investors’ exposure and potential loss of control.
In Australia this can be done through a special type of trust called a ‘Vestey Trust‘. It was pioneered by Lord Vestey, one of the wealthiest men in Britain in the late 19th century. The principle was eventually applied to Australian law, since it derives from British law.
The Vestey Trust offers lifetime protection to all assets you own in Australia and overseas. It prevents creditors, the government and lawyers from touching your most important assets in the event of you facing financial hardship. And the good thing is, it doesn’t require you to remove people from any title or change ownership to a different entity. It also doesn’t affect your taxes as other trusts do.
The legal team at DG Institute has reverse-engineered the debt collection process in order to create what we believe to be one of the safest asset protection strategies in Australia. It is a personalised asset protection plan called Master Wealth Control which relies primarily on the Vestey Trust system but goes beyond it, including complimentary contact reviews and negotiation for life.
You can find out more about the DG Institute’s asset protection strategies by visiting dginstitute.com.au.
Lawyer, Asset Protection Specialist and Property Educator
Dominique Grubisa is a practicing legal practitioner with over 22 years of legal and commercial experience. She is a property investor and developer, an entrepreneur with businesses in Australia and Southeast Asia, a speaker, educator, writer and published author. You may contact Dominique at firstname.lastname@example.org
This column has been written for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such.