Accumulating family wealth demands considerable time, effort, and dedication, often involving significant challenges and sacrifices. Unfortunately, this hard-earned wealth can easily crumble under the weight of costly legal battles, regulatory hurdles, and economic uncertainties. It is not uncommon for estates of deceased individuals valued at $1 million to face challenges, resulting in legal fees exceeding $200,000 and years of litigation. The scale of the estate directly correlates with the magnitude of associated fees. Individuals engaged in various professions, such as doctors, property developers, or even hairstylists, may find themselves vulnerable to prolonged and expensive legal disputes.
However, this undesirable scenario is entirely preventable.
II. FAMILY WEALTH – IS IT SECURED?
Five potential threats loom over family wealth, each representing a ticking time bomb capable of jeopardizing both financial prosperity and well-being.
In the current era, individuals can face lawsuits from a myriad of sources, including employees, children, spouses, neighbors, government bodies, councils, tenants, and regulators. Australia, producing the highest number of law students per capita globally, boasts a robust legal industry generating over $23 billion in annual revenue. Any asset held in one's name is vulnerable during litigation, with the primary concern not only being the legal battle itself but the prolonged duration, stress, and escalating legal expenses.
Mental incapacity renders a person unfit to serve as a trustee or company director. Unexpected medical events, as exemplified by the COVID pandemic, can incapacitate individuals, leaving critical roles vacant. Without strategic preparations, businesses, trusts, super funds, and investments face uncertainty and potential peril in the absence of leadership.
The financial fallout from events like COVID can significantly impact the income and stability of business owners and professionals. As insolvency becomes a looming threat, family wealth, encompassing assets, investments, companies, trusts, and super funds, remains exposed to potential insolvency or bankruptcy.
Contrary to common expectations, having a Will does not guarantee the seamless distribution of personal assets. Disaffected parties can contest estates in every Australian state, leading to prolonged and costly court battles. Family assets, including homes, investments, and superannuation, are susceptible to litigation following the death of a key person, director, or trustee.
5. FAMILY LAW
Many are unaware that a two-year de facto relationship grants both parties full recourse against each other's property in the event of a breakdown, as per the Family Law Act in Australia. Actions such as giving money to adult children, providing inheritances, or holding unpaid present entitlements in a family trust can complicate matters in relationship breakdowns or divorces, potentially leading to the intervention of the Family Law Court.
III. SOLUTION – THE PROTECTOR
To address these potential threats, our preffered parter through the We Love Group, legal and estate planning experts, have introduced "The Protector," a comprehensive family wealth protection package. This package not only ensures asset protection but also safeguards assets for the benefit of chosen beneficiaries within the family lineage, thereby securing assets for future generations.
In Part Two of our Guide to Family Wealth Protection we will review each of the steps and why they are important.
If you are interested in adding Succession, Asset Protection and Estate Planning to your advising skills then contact us at Wealth Effect Group to access your requirements. Click the link to book.