What is the best way for you to protect your wealth?

Dominique Grubisa
Dominique Grubisa

Published 6:43 am 14 Apr 2019

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What is the best way for you to protect your wealth? DG Institute Founder and CEO, Dominique Grubisa is going to share with you what you need to do to make sure that you’re bulletproof, why other people fail, and how it’s possible that you can lose your shirt sometimes without being fully protected.

Having been a lawyer for nearly 30 years now and personally having lost all my wealth, having to rebuild it from the ground up, in fact not even the ground, many millions of dollars in a black hole of debt, I know a thing or two now about asset protection.

Usually, there’s a balancing act that we all have.

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We have to balance out three things when it comes to wealth and investment:

1) Firstly, we have to consider tax implications.

We’re often told, oh, you should own in a company or a trust, or in your own name, or in some other entity because of tax implications.

So that’s the first thing that we have to consider and we have to talk to our accountant about that.

2) The second thing that we have to balance out after tax is borrowing.

Often when it comes to wealth and investing we are using other people’s money.

Whether that’s a private finance, or whether we are venturing with other money partners, or whether we’re borrowing from a bank, we have to think about how we are going to get the money for our investment and that will dictate the entity that owns it.

If it’s a joint venture, are we forming a company with money partners, is it a trust where everyone owns units in a trust? There’s a lot of legal strategy and thinking behind it.

Sometimes though, the two things that we’ve talked about conflict, so your accountant might say, oh, do this one in your company, or in your trust, because that’s the right way for this property deal, for example.

But then, you’ll go to a bank and they’ll say, oh no, we don’t like that, we’ll only lend money to you and your personal name – we’re not going to lend to this trust.

You have to balance up tax and borrowing.

3) The third consideration is asset protection.

Sometimes accountants may say to you, oh no, you should borrow and own in a trust because it protects you.

That is a misunderstanding.

In law, to say that ownership in other entities protects you is just, unfortunately, wrong.

No matter how you own an asset, the law looks behind ownership. So you can’t say, oh, I’m going to own this in a company and then no one can touch me, or I’m going to own this in a trust with a company as trustee and then I’m bulletproof.

The law is like a hot knife through butter when it comes to ownership. Those days are long gone when you can say, oh well, I’ve set up a two-dollar company and I’m director and if it all goes wrong, I’ll just walk away because it’s not me, it’s the company nor you can say, I’m going to put it all in my husband’s name and me as the wife then will have no responsibility and there will be no ramifications on me.

The law looks through that and behind ownership.

What the law says is, who benefits from this transaction, who is the beneficial owner? Not who is registered as owner on the title, but who really benefits from this transaction. They’ll look to the beneficiaries of any trust.

With a company, directors are what they call vicariously liable. What that means is that if the company goes wrong, the law looks to the directors of the company.

At the end of the day, with that balancing act, what you should do is worry about tax and worry about borrowing. That’s who should own any investment that you buy or go into. When it comes to asset protection take that out of the equation because ownership will never ever help protect you.

There are other ways legally to protect your wealth and bulletproof yourself, to ring-fence all of your wealth so that it’s protected. So should anything go wrong you can cut off the gangrenous limb.

We’ve got a lot of clients, for example, who have mining town stress. They bought properties at the height of the mining boom and they borrowed a lot of money and now those properties have fallen in price, and what that means is that they owe the bank more than the property is worth. With that kind of bad debt that can often come back to bite you – the bad debt can come and chase your good assets or your wealth.

It’s really, really important to get protected so you can cut off the gangrenous limb and the disease doesn’t spread through the rest of your wealth. There are legal ways that you can do that.

Anything is possible, it’s just understanding the situation and the legalities, and the structuring can be built even around assets that you already own.

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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 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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