With a recession looming, now is the right time to protect your assets

Dominique Grubisa Dominique Grubisa

Storm clouds are forming over the Australian economy. With annual economic growth at its lowest point in a decade and trouble brewing internationally, many experts believe a recession is on the way. Whether or not that happens, now is a great time to lock in an asset protection strategy to keep your assets safe. DG Institute Founder and CEO, Dominique Grubisa, explains more.

Australia has a something of a knack for sailing through economic trouble when the rest of the world is flailing. While the United States and other parts of the world fell into recession after the dot-com crash and the GFC, Australia maintained positive growth thanks to strong exports and healthy domestic consumption. In fact, the last time Australia recorded two consecutive quarters of negative growth – the technical definition of a recession – was 28 years ago, way back in 1991.

But now a perfect storm of economic factors has many economists worried. Experts including former Prime Minister Kevin Rudd believe a recession could be just around the corner, with devastating impacts for all types of Australians.

Top of the list of indicators for a looming recession in Australia is our recent poor economic performance. Figures released by the Australian Bureau of Statistics in September show Australia’s annual GDP growth rate – a measure of our productivity – dropped to just 1.4 percent at June 30. This was its lowest level in 10 years. Then there were the figures for domestic consumption – one of the driving forces of the economy. Household spending grew a measly 0.4 percent in the June quarter, while housing investment slid back a whopping 4.4 percent. Add to this stagnating wage growth, rising unemployment, and record levels of debt among Australians and you have big economic problems. In short, we’re spending less, pumping less money into the economy and increasing the chances of negative growth.

External Factors

asset-protection-vestey-trust-dg-institute-dominique-grubisa

The situation is made more perilous by a complex international situation. As Federal Treasurer Josh Frydenberg recently put it, the local economy is facing “significant headwinds, both international and domestic”. The US economy is widely tipped to soon slide into recession following its longest expansion ever and a damaging trade war with China. And as the old saying goes, ‘when the United States sneezes, the world catches a cold.” Meanwhile, the economies of Germany and the UK are already contracting. If a global recession hits, Australia may not remain immune this time.

If we do indeed slide into recession, no level of Australian society is likely to emerge unaffected. The stock market is likely to dip, affecting the investments of mum and dad investors – and their superannuation. There are likely to be far higher levels of unemployment, placing stress on individuals and families. In the 1990 recession, the jobless rate hit 10.8 percent. Those lucky enough to be in work will need to make do on lower wages and reduced family incomes. There will be a reduction in business opportunities for entrepreneurs and the big end of town, and businesses will close. Typically, real estate values fall. There will also likely be a spike in repossessions and forced sales as people struggle and then fail to make mortgage payments on their properties.

It’s a frightening prospect if you have worked hard to buy a home, accumulate a nest egg and make an investment or two. Often, all it takes is the loss of a source of income, a business failure, or a lawsuit for our financial empires to come crashing down. In such cases, people often have their entire wealth stripped away – a devastating prospect, particular in the second half of life.

The problem lies in the way that we structure our wealth. A good 98 percent of the Australian population holds their assets in a manner that leaves them vulnerable to being plundered should things go wrong. Whether we own our houses and valuables in our own names or through a company or family trust, the nature of our legal system means a decent lawyer or accountant will take only a matter of minutes to identify the money trail and to begin stripping assets away.

But there is a way to protect our assets that secures them against being stripped away in the event of financial catastrophe. DG Institute’s Master Wealth Control program teaches you about a concept developed over a century ago by the Vesteys, one of Britain’s richest families. Through brilliant accounting they devised a system whereby their assets were safe from both private and government accountants seeking to plunder them. 

Asset Protection Strategy: The Vestey Trust

Asset protection vestey trust

The Vesteys’ basic idea was to make yourself a ‘man of straw’. While you are free to enjoy your assets and utilise them to make money, you become as insubstantial as a scarecrow if someone tries to take those assets away. 

For example, take the area where most Australians invest their wealth: property. In the event of a catastrophic financial failure, creditors and liquidators may try to seize the equity an individual holds in their house to pay creditors. But what if there is no equity in the home and nothing for liquidators to seize?  

The Vestey trust system works by establishing a ‘friendly creditor’ in the form of a special trust that owns the additional equity in your assets. A caveat is placed on the property title directing that the trust owns any equity beyond the loan amount. Because the caveat is placed on the title when times are good, it takes priority over subsequent claims by liquidators in times of distress.    

By using the lessons learned in the Master Wealth Control program and restructuring your assets, you stand your best possible chance of withstanding any financial storm. While others struggle, you’ll be free to pursue your financial dreams.

If you’re interested in learning more about asset protection, join the upcoming Master Wealth Control webinar with Dominique Grubisa.


Good Debt Vs Bad Debt With Dominique Grubisa - DG Institute

DOMINIQUE GRUBISA
Lawyer, Asset Protection Specialist and Property Educator

Dominique Grubisa is a practising 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 info@dginstitute.com.au


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.

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