Asset Protection: the Gift and Loan Back

Over your lifetime, you may have accumulated significant assets in your personal name. This could be your main residence, an investment property, a share portfolio or equity in a family business.

Unfortunately, valuable assets in your name can be exposed in a number of ways, including:

Tax and Duty

To better safeguard your valuable assets, the simplest thing to do is to transfer your valuable assets to a safer structure, such as a discretionary trust. However, unless exemptions or concessions apply, transferring valuable assets will often trigger significant capital gains and/or stamp duty.

Gift and Loan Back Arrangements

A common asset protection strategy is to implement a ‘Gift and Loan Back’ arrangement. Under a gift and loan back arrangement:

The gift and loan back is represented in the following diagram:

Gift and loan back arrangements are not as simple as the above diagram suggests (and you are **not **a gingerbread man). There are a number of legal issues to consider before entering into a gift and loan back arrangement:

The gift and loan back arrangement can be effective asset protection strategy, particularly where the CGT and stamp duty costs of a simple transfer of assets are prohibitive. However, they are not simple and care must to taken to fully understand their consequences.

‍This article in no way constitutes legal advice. It is general in nature and is the opinion of the author only. You should seek legal advice tailored to your individual circumstances before acting on anything related to this article.