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Good to Great: How to Scale With an Outsourced CFO

Small to medium-sized businesses reach a point in their growth where access to the skills and talents of an experienced Chief Financial Officer (CFO) is required.  The question they often have? Is there enough work to warrant a full-time CFO? The answer is yes.....

You've worked hard to acquire your assets, so it's safe to assume that you'll work just as hard to protect them––and the best time to protect your assets is before a claim emerges.

What is Asset Protection?

Simply put, asset protection refers to the strategies used to guard one's wealth against taxation, seizure, or other losses.

Asset protection helps legally insulate assets without engaging in concealment (hiding of the assets), contempt, fraudulent transfer, tax evasion, or bankruptcy fraud––all of which are illegal.

When implemented correctly, asset protection strategies can limit the potential access creditors may have to the valuable assets of individuals and business entities while operating within legal boundaries.

Moving forward, you'll want to work with an authorised adviser who'll ensure that the strategies implemented are tailored to your circumstances and are legally effective.

They may recommend that you consider protecting your assets in the following ways:

1. Set Up a Family Trust

Family trusts are popular structures used for asset protection. This is because the trust assets belong solely to the trustee and not the individual beneficiaries, meaning they generally can't be used to pay creditors of individual beneficiaries.

Utilising a family trust as an asset protection strategy may also protect family assets in the event of a marriage breakdown. If the former results in a family law property settlement, then assets held within the family trust have a higher chance of being excluded from the settlement than assets held by the individual directly.

Aside from offering protection of your assets, a family trust can provide tax benefits by distributing income to family members in lower tax brackets. Professional advice from a financial adviser will determine if setting up a family trust is the right way to protect yourself financially.

2. Low-Risk Spousal Ownership

An effective asset protection strategy is to allocate valuable assets, such as the family home, to the low-risk spouse or another entity not controlled by the higher-risk spouse. Protecting the family home is usually a top priority when a person is at risk through their occupation or other reasons.

If structured correctly, transferring any property held in your name to your spouse’s name could make it more challenging, say in the case of bankruptcy, for a trustee, liquidator or creditor to gain control of the asset.

3. Set Up a Company

A comprehensive asset-protection plan aims to prevent or significantly reduce risk by safeguarding your business and personal assets in case of a creditor claim. 

An effective strategy for an individual running a business is to set up a company structure instead of a family trust. By doing so, you can safeguard your assets more significantly than if you choose a sole trader or partnership structure.

A company structure offers a separate legal entity to its directors and owners. Although companies remain liable in the event of a creditor claim, the personal assets of their directors and owners are more often than not protected against creditor claims. 

Given that there are specific legal requirements for setting up and registering a company in Australia and ongoing legal compliance requirements, there may be a better strategy for your situation. Seeking advice from your financial planner will set you in could stead.

4. Adequate Insurance Coverage

An adequate insurance policy that covers your assets is a non-negotiable asset protection strategy. Whether it be life insurance, income protection insurance, critical illness and trauma insurance, or total and permanent disablement insurance, staying on top of your coverage and ensuring that it meets your ever-changing needs is vital in protecting your loved ones and your assets.

Life Insurance

Establishing a life insurance policy will protect your family from the financial strains of life's most inevitable challenge: death. Beneficiaries will typically receive a life insurance payment in one lump sum, giving them the ability to meet their financial needs if you should suddenly pass away. Families often use insurance payments to reimburse medical bills, funeral costs, mortgages and other significant financial obligations.

Income Protection Insurance

If you should fall subject to a temporary injury, illness, or disability and are put out of work for some time, income protection insurance ensures that you and your family are not disadvantaged. Insurance such as this covers a significant portion of your monthly income, allowing you to stay afloat through an otherwise difficult time.

Critical Illness and Trauma Insurance

Critical illness and trauma insurance can offset medical bills and treatment costs when faced with a critical illness or severe trauma. Many policies often cover various types of cancer, heart attack, stroke, and other serious illnesses. However, it is essential to note that each provider will vary in scope of coverage. Your financial planner is there to help you understand your policy and identify conditions eligible for coverage if a critical illness or trauma were to occur. 

Total and Permanent Disability Insurance

Total and permanent disability insurance is often combined with life insurance. This specific policy provides financial support should you become injured and unable to work again. There are multiple situations in which coverage applies. For example, if you were to suffer an injury or sickness and, as a result, are no longer able to perform regular work duties, you may be eligible for a lump sum payout. At the same time, you may also utilise your income protection policy, essentially offering you a regular payment.  

Protect Now, Enjoy Later

As an individual investor or business owner, it's essential that protecting your assets be as much a priority as accumulating them. Without an adequate asset protection plan, your assets and your future are at risk. 

While there is no one-size-fits-all when protecting your assets, and some losses may be inevitable, there are many strategies you can use to minimise your risk and offer protection. Seeking advice from an Altus financial adviser specialising in asset protection can assist you in arranging a plan that will best suit your assets. An effective adviser will always work to maximise your asset protection while legally minimising your tax liabilities.


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