No perfect solution for protecting assets

Liz Koh.

The more wealth you acquire, the more important it becomes to look at how your significant assets such as your home, investments and insurance policies are owned.

Ownership has flow-on effects in terms of tax, estate planning, and protection of your property against claims from creditors or former partners.

At the simplest level, assets can be owned individually or jointly if you are in a committed relationship.

Owning assets in your individual name does not protect you against a relationship property claim from your partner in the event a relationship ends.

Individual ownership of investments can, however, have tax benefits if you and your partner are on different tax rates.

In the event that one partner dies, ownership of jointly owned assets will automatically pass to the survivor, whereas individually owned assets transfer to the estate, resulting in time delays and cost.

'Tenants in common' is a variation of joint ownership where on death of a partner, ownership of the deceased person's share transfers to the beneficiaries of their estate.

This can be useful as a way of transferring wealth away from the survivor so they fall within asset thresholds for means tested benefits, or as a way of ensuring children from a prior relationship receive their inheritance.

Family trusts are particularly useful for easy estate planning and protection of assets from creditors or relationship property claims.

However, it is becoming very difficult to use them as a protection from means testing, for example for rest home subsidies.

They are costly to set up and administer, and have to be looked at in relation to the benefits offered.

There is no perfect solution for asset ownership.

Every solution has pros and cons, and it is a matter of weighing them up to see which offers the greatest benefits overall.

- Liz Koh is an authorised financial adviser. The advice given is general and does not constitute specific advice. A disclosure statement is free. Call 0800 273 847. For free e-books, see moneymax.co.nz and moneymaxcoach.com.