If you are self-employed in the form of a sole trader or partnership, with the business  held in your name, and you are sued, you could then lose your home and everything in your name.

On the other hand, a company is a separate legal entity. Whilst it provides some kind of asset protection because the business is not held in your personal name, if someone was to sue the business, they sue the company, not you. In limited circumstances, as the director of the company, you can still be personally liable for the wrong action of the company and anything you own under your name is not protected if you own shares.

If you have heard of the famous statement by Nelson Rockefeller famously said, “The secret to success is to own nothing, but control everything" The specialist mortgage broker should have the knowledge to point you in the right direction and show you the way of how you can control everything but own nothing.

A wealthy individual should put their assets in something like a Trust, which separate the control and ownership.

The Trust Solution

There are four main components of a Trust

• Trustee – the administrator or decision maker of the trust.
• Beneficiary – the receiver of the benefits
• Appointer – the person who decides who the trustee will be.
• Settlor – the person who helps set up the trust. Once the trust is set up, the settlor plays no further role.

The main benefit of a trust structure is that it provides flexibility. Income can be distributed to the lower income earner, and assets can be protected and wealth can be passed on to next generations with minimal fuss and little or no tax payable.

When the assets such as company shares or properties are held in the trust, they are no longer owned by trustees or beneficiaries. Therefore, if any beneficiaries or trustees find themselves in litigation, then the trust assets are not available to creditors.

The way to make your assets more protectable is to,

Set up a trust. Make sure you are both trustee and beneficiary of the Trust

Transfer assets under your personal names to the trust, so there is no clear path back to you.

Gift the assets to the Trust. If the Trust still owes you money, then the assets in the Trust still expose to a degree of risk as a creditor could pressure you to call up any unpaid loan balance.

Restructure your finance so the new Trust becomes the borrower on all of your existing bank debt.

Now, when you are being sued, they are only after money. If they see you own nothing under your name, generally people don’t bother because they are not going to spend money to litigate against you and at the end of it have nothing out of it.

So, essentially, doing so will separate the ownership of the home from exposure to any personal risks.

Disclaimer: The content in this article are provided for general situation purpose only. To the extent that any such information, opinions, views and recommendations constitute advice, they do not take into account any person’s particular financial situation or goals and, accordingly, do not constitute personalised financial advice. We therefore recommend that you seek advice from your adviser before taking any action.