Another important factor to consider when producing an effective financial plan is who owns a particular asset. This can be your principal residence, an investment property, or superannuation/pension or investment account.
Some common reasons for making special considerations around asset ownership are as follows
Disparate incomes
Under various circumstances a husband/wife/spouse/partner may make more money than the other due to their experience, qualifications and/or type of employment. One partner may also opt to take on a larger proportion of childcare responsibilities when they have children, or one partner may not be able to work full time because of illness or injury. This may leave one partner in a higher tax bracket. Therefore it may be beneficial to register an asset in the spouse’s name, in order to allow the income from that asset to be assessed in the name of the spouse who earns the lower income.
Asset protection
This may be particularly applicable to anyone who operates a small business and may wish to manage the risk of someone pursuing them in a legal sense. A common example may be to hold your principal residence in your spouse’s name if you own a small business.
Income distribution/tax effectiveness
In some circumstances using a trust structure can be an effective way to manage asset protection and have control over distribution of proceeds of a trust. This may allow the trust to direct proceeds to a beneficiary in a lower tax bracket.
If both spouses are employees and are on comparable incomes, in most cases it makes sense to own assets in joint names. No two examples are the same. When you speak to the team at Fleming Financial Planning, we will complete an assessment of the most beneficial asset ownership structure to suit your needs, with the aim of keeping it simple.