You’re a 9-5 worker and of course feel that you’re stuck in a rut. You feel there is no way for you to earn more than what you have now unless you get another job. You feel the same way as most of us do.
What you need to remember is that there are ways to build wealth. In building wealth, we need to consider two issues:
Let’s look at the “strawman” and “person of substance” method to protect your assets.
A great strategy for married couples or business partners in certain situations
Man of straw is at risk of attack, and sign their name to everything. They are the company director, trust appointor, signatory to risky deals
Person of Substance is not at risk and signs their name to nothing, yet controls all the assets
So the man of straw is at RISK. But controls NOTHING.
The person of substance is NOT at RISK. But controls EVERYTHING.
Using a TRUST to protect assets
Trusts are wonderful vehicles to save tax, protect assets and create estates for your family for many generations. Trusts are wonderful structures because as well as protecting assets, they can significantly reduce your tax.
There are various types of trusts. The main trusts used in business are discretionary trusts and unit trusts. There are also hybrid trusts (which are a mixture of discretionary trusts and unit trusts).
Family discretionary trusts are an ancient way of building and preserving wealth. Indeed, trusts have existed since medieval times. Family discretionary trusts protect assets because no-one actually owns the trust assets, ie. the Trustee holds the assets on trust for a number of beneficiaries and can give the assets and income to whoever the Trustee desires at their discretion. They are a tremendous vehicle to use in business or investment.
The parties to a standard family discretionary trust are:
The Trustee is the PUPPET. The Appointor is the PUPPET MASTER. The Appointor can SACK the Trustee at any time.
For asset protection, the Appointor and Guardian of the Trust is the “person of substance” and the Trustee is the “man of straw”. Therefore, the Appointor and Guardian should be the person of substance, or an entity controlled by the person of substance, while the Trustee should be the man of straw, or an entity controlled by the man of straw.
It is common with family trusts (and highly recommended in most cases) that the trustee be a company. The reason is it creates an extra “firewall” of protection between your creditors and your assets.
The director of the trustee company, of course, should be the “man of straw”.
Still confused? We would be happy to help you with your questions. Contact us at [email protected] or call us at 1300 669 336.
At Wealth Safe, we’re here to help you with all your asset protection, tax planning, business structuring and superannuation needs. We work with you to find the best strategy to keep your assets safe, slash your tax 100% legally, and put more money in your pocket.
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