Charlotte Lockhart: How to avoid exposing your family home to business debt

By Charlotte Lockhart, Perpetual Guardian Consumer Advocate

Taking on debt to run your own business is one thing, but risking your family home or other assets if the venture fails is a different ball game.

While no one plans to fail, failing to plan often results in consequences that could have been avoided. When starting up or running a business, it is not uncommon that personal guarantees or debts are incurred to enable the business to function and meet day-to-day operations. By giving this guarantee or incurring the debt, those lifestyle assets that are traditionally passed on to your loved ones (family home, holiday home, investments) are exposed to loss.

Why is a family Trust important?

Failing to protect your lifestyle assets in a Trust could leave them exposed to loss should tough times hit the business or if, in the worst case, the business fails.

A Trust enables you to separate the ownership of your lifestyle assets from your business assets, so if the worst happens, it doesn’t mean the loss of your personal assets as a result of the business failing.

To ensure the protection of the Trust, it is paramount the Trust is run properly and meets best practices. A Trust is a separate legal entity and needs to be maintained and treated accordingly.

Almost one in five New Zealanders (18 per cent) have a Trust, but many are unaware of legal changes that could potentially leave them exposed. Perpetual Guardian has developed a simple checklist to work with Trustees in conducting a comprehensive review of an individual’s Trust. The checklist helps individuals ensure their Trust meets stated goals and compliance standards. Available online, it includes questions on the Trust Deed, the structure of the Trust and how it is managed.

A Trust is there to protect the ownership of your assets and ensure your family receives the full benefits of your hard work; therefore, a well-managed Trust is vital.

About Charlotte:

Charlotte Lockhart is a business leader with more than 25 years’ experience in multiple industries locally and offshore. She watches out for the estate planning interests of New Zealanders in her capacity as a consumer advocate at Consumer Voice. Charlotte’s goal is to break down some of the perceived barriers and raise awareness by engaging with a variety of media and stakeholders.

In a previous role, Charlotte was head of partnerships and marketing at Perpetual Guardian (New Zealand’s leading trustee services company). During her time with Perpetual Guardian, Charlotte designed and implemented the new brand strategy and installed the new sales team across New Zealand. Perpetual Guardian believes that every adult New Zealander should have a Will and that every child deserves the protection of one.

Charlotte has an extensive background beyond the fiduciary services market, having worked in the financial and legal services sectors earlier in her career. In her 12 years with Mike Pero Mortgages, she won awards for her advisory services. She is passionate about ensuring New Zealanders protect their families and themselves from financial and legal problems which can often be avoided with a little planning

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