Protecting Assets - Safety Measures

The recent economic turmoil proves that no-one should take their financial stability for granted, and hindsight shows that history confirms this to those who look.  If High Street banks can find themselves in the difficulties we have seen recently, how can we, mere mortals, predict our financial futures?  Many people have seen their hard-earned savings being seriously depleted almost overnight through no fault of their own.  Viable businesses have found it almost impossible to borrow, and staying within agreed credit limits has suddenly presented challenges beyond their previous experience.    Share prices have been all over the place but mostly downwards. Many people have never experienced anything like the present financial world in their business life. And to rub further salt into the wound the pundits are saying it is going to get even worse.  It all seems beyond our control and that there is nothing we can do.  But do we need to feel so helpless about protecting the assets we still have?

Even in good times many people wait until there are problems before they try to protect their assets.  By then, it is often too late.  Trying to shift assets to a spouse or children at the eleventh hour is too late.  Trustees in bankruptcy have wide-ranging powers to retrieve assets which have been moved to avoid creditors’ claims.  The law assumes that if you move assets to your family or “associates” when you have financial difficulties, you have done so to avoid your creditors.  It just does not work.

However, this only applies if you have actual financial difficulties at the time you transfer the assets.  So the time to get your house in order is while your finances may allow this.

If the world around you is riding out the financial storm now could well be the time to consider a lifetime trust for some of surplus property, cash or shares you have.  By transferring ownership of those assets to a trust, this means that you personally no longer own them; the trust does.  However, this does not mean to say that your family cannot use those assets – their use will depend on the detail of how you set up the trust.  The important point is that if you have made the move soon enough and under the right conditions, then if your circumstances, or those around you, implode, the assets in the trust could be protected from your creditors.

Trusts need to be set up with care, and there are tax implications in doing so.  If the writing of financial difficulties is already on the wall, it is likely to be too late. Also, once the assets are in the trust, you are unlikely to be able to get them back again.   However, despite this, if you are in a position to do so, the circumstances are suitable and you have assets which you could put into safer territory, a lifetime trust may be a wise option to consider. 

To contact Raworths, telephone 01423 566666 or visit our offices at Eton House, 89 Station Parade, Harrogate HG1 1HF. Alternatively you can email Justine - justine.hardy@raworths.co.uk.