Everyone is familiar with the practice of quarantine – it’s about isolating risks. Quarantining your assets is about isolating them from risks by creating ownership structures that make people and organisations who are not exposed to risk the legal owners of the assets.
Mixing assets and risks is a dangerous practice. I have a client who runs a very successful import business – he is the sole distributor of a particular type of industrial equipment in Australia. Over the years, he has been successfully sued twice as a result of injuries sustained by people using the equipment he imports. When I met him he had $1 million cash in the bank. This is a great example of how to expose your assets ($1 million) to risk (high possibility of future legal actions). Should he be sued again (which, based on past experience could reasonably be expected) he had $1 million in cash ready and available for any award made against him – it wouldn’t even have been dif?cult to release his assets, a simple bank transfer could have seen his $1 million paid out instantly.
Quarantining assets is about separating them from risk, so that where there is risk, there are no assets. The key is to identify people without risk who can become the legal owners of the assets. My wife, for example, is a person without risk – she doesn’t work in my business, she doesn’t advise clients and isn’t a shareholder or director of any of my companies. The likelihood of her being sued is virtually nonexistent, so it makes sense that she should be the owner of the assets. While it
is usually a spouse that is identi?ed as a person without risk, that’s not always the case – the important thing is that it is someone who is completely isolated from ownership of your business and its operations.
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