We live in an incredibly litigious society. Australia is probably the second most litigious country in the world according to US management liability specialist Kevin LaCroix. So, do you know how to protect your house from a lawsuit?

You may think so … but you could also be in for a rude shock. 

Did you know New South Wales is the third highest jurisdiction in the world for lawsuits per person? And the average Californian gets sued 4 times in their life, with NSW and Victoria not far behind?

It gets worse…

Did you know having assets in your own name can cost you everything if you get into a dispute with the Tax Office?

Furthermore, if you hold assets in your own name, you could lose absolutely everything … whereas holding them in a structure or even a mortgage, lien, caveat or charge created over the assets can increase your protection by up to 99%?

These are sobering facts of the world we live in which is why we educate you on how to protect your assets from crisis, including lawsuits.


    – In a committed relationship (such as de facto), the spouse at less risk of being sued could sign their name to have majority of the ownership of the property.

    – One may consider transferring the asset into a structure however needs to be discussed thoroughly with a specialist as there are certain tax issues you could trigger upon the transfer.

    – If your family home is in your own name, it can still be protected by putting a security over it. Such as a caveat or second mortgage. This is our preferred strategy.

Why Protect Your House From A Lawsuit And Creditors?

Family Home Asset Protection

Asset protection was once a luxury but now it’s become a dire necessity. With the number of lawsuits increasing and large corporations looking to take control over your life decisions, having insurance over your assets is critical.

For example, Biden has announced his plans to seize assets of Russian billionaires after the invasion. Mind you, some of these oligarchs voted the opposite party yet just because they were connected to Russia this deemed them a threat. 

That shows if you’re indirectly on the wrong side of the regime, this itself makes you a threat to system.

If your house or assets aren’t protected, one simple lawsuit or economic change could cost you everything. Just one.

Think about it for a minute… 

You most likely own a car and have car insurance. But why? I’m assuming you’re not expecting to crash it tomorrow. Rather, you want to ensure if you end up facing a nasty accident … you’re covered, and don’t have to fork out a small fortune to fix the problem.

Now let’s compare this to your assets. 

If you don’t protect your assets, you put your entire financial livelihood on the line on the hopeful assumption nothing bad will happen. Yet sometimes bad things happen to good people as they say.

Asset protection over your house covers you from the danger of thieves wanting to steal your equity, either directly through lawsuits, nationalisation or blatant theft…

OR indirectly through a reset, socialism or inflation. 

The best case scenario of asset protection is you never have to exercise the insurance premium while the worst case is you do but know you’re still covered.

Yet, most people don’t see the need to protect their house from a lawsuit because they can’t imagine it actually happening. Trouble is, if that small chance ends up happening, it’s going to be extremely costly, or impossible, to fix.

Car crashes or health crisis’ don’t often happen to us but we still pay for the insurance because it gives us peace of mind.

Equally, your assets should be insured.

While times are easy or before the damage has occurred, that’s the time to do it.

“Plan for what is difficult while it’s easy” – Sun Tzu, The Art of War

The BIG Problem You Silently Face If Your House Isn’t Protected

How Do I Protect My Home From Being Sued

We’ve always been taught it’s a wise long-term goal to borrow from the bank to purchase a home and work our entire life to pay off the mortgage. When the mortgage is finally paid off, it feels like a pinnacle of success to own a home outright.

However, this equally has its drawbacks. 

Did you know … the closer you are to paying off your mortgage, the more equity you expose to thefts. 

I’m not saying it’s a bad idea pay off your debts, quite the contrary, I’m merely showing the threats possible if your house isn’t protected.

Therefore, it’s essential for you to know how to protect your house from a lawsuit or otherwise. If not, your house, your “castle”, is put at major risk.

How to Protect Your House From a Lawsuit Example:


    Assume my house is worth $2 million AUD but it’s in my own name.

    If the bulk of my mortgage is paid off, with $400k remaining to pay CBA, this sounds good in principle … but on the flip side, a predator would see this as their “golden egg” to collect a massive payday. The house has $1.6 million equity at risk!

    If the house is forced to sell, you can imagine how much can be lost from one lawsuit. With the increasing amount of lawsuits and court wins, you can see the issue here.

    Taking this further, if you own property outright with no asset protection, it’s even worse. The entire equity could be taken from you with no compensation for your troubles. Not to mention the legal fees and stress that would be involved too.


    There’s a couple of ways you can solve these issues. The general principle of asset protection is to have as much separation and divorcement between you, the individual, and entity as possible.

    If that’s not possible, the alternative is to keep it in your own name but make it look as if it’s debt-ridden.

The Secret Is, “Own Nothing But Control Everything”

This is the ultimate key to asset protection the elite and high net worth follow. 

In fact, you can see millions of leaked documents in the 2016 Panama Papers and 2021 Pandora Papers revealing famous celebrities, politicians, world leaders, businessmen and investors who use offshore structures to protect their wealth and legally reduce taxes.

So let me say it again. The secret to protect your house from a lawsuit is to control, not own. 

If your house is your own name, is there anything that can be done about it? Short answer is yes. 

Strategy 3 will cover how to protect your house from a lawsuit if it’s in your own name.

But before we cover this, let’s look at 2 other strategies one may consider to protect their house.

Strategy 1: Strawman & Person of Substance Rule

One of our favourite ways to protect assets, including a house, is to use the strawman & person of substance rule. This is a simple and well-known yet highly effective method that works well for committed marriages.


The person who is at risk of attack, signs their name to everything and therefore is the owner. 


The person who is not at risk of attack and doesn’t sign their name to anything. 

How This Strategy Works For Couples

The strawman (person at risk) owns but doesn’t control while the person of substance (person not at risk) controls but doesn’t own.

By using this strategy, it creates an illusion of who owns the asset(s). The attention will be on the strawman while the person of substance is the one who is actually controlling the assets and decisions.     

Using this strategy, one would simply put the Title to the home in the “low risk” spouse’s name. If someone sues the spouse with the higher risk lifestyle, they can’t touch the house as it’s legally separate and belongs to the other spouse.

However, a word of caution, you need to think about the state of your relationship. A serious break up or divorce means you may lose your house if you and your spouse can’t reach a settlement.


    Donald and Daisy purchase a house in joint names, with an estimate value of $3 million. This means they’re jointly liable for debts, risks and attacks.  

    Daisy is a criminal lawyer and her husband, Donald, works part time as a primary school teacher.

    In this case, Daisy is the one at risk of being sued. Donald is far less likely to be sued.

    Therefore, Daisy is the strawman while Donald is the person of substance.


    For effective asset protection over the property, the majority of the ownership over the house should be under Donald’s name as he is at less risk of facing a lawsuit or government attack while Daisy controls the asset and makes the decisions.

    If the house was already purchased under joint names, Daisy needs to be careful before transferring the ownership to Donald as bankruptcy clawback rules mean the transaction can be reversed.

This strategy works brilliantly for couples and, in limited circumstances, can work for singles.

How This Strategy Works For Singles


    Goofy is a business owner who sells herbal medicine.

    He owns a house, shares in the stock market and 3 investment properties all under his own name.

    In this case, Goofy is both the strawman and person of substance.


    Goofy could own all the assets in companies or trusts. Nothing in his own name. This atleast gives him protection if he faces a lawsuit. 

    However, as the properties were already purchased in his own name, the asset transfer process could be costly and trigger issues such as stamp duty, land tax, FBT, CGT, etc. 

    This would need to be discussed with a specialist.

    Further, it doesn’t avoid the bankruptcy clawback law.

    Alternatively, any equity can be protected by creating a second mortgage, even if your house is under your own name. We discuss this in strategy 3.

If you wish to discuss options on how to protect your house from a lawsuit, please complete this free consultation form and we’ll be in touch.

Strategy 2: Transfer Your House Into A Structure

Property Protection in Australia


The second strategy is to transfer the asset into a structure. However, what sounds simple may not be the case. In fact, it can be quite catastrophic.

Depending on your personal circumstance, this process could trigger tax issues such as stamp duty, land tax and CGT. In NSW, for example, you could end up paying higher land taxes when doing this.

If you own an investment property, you could end up paying CGT. 

With a family home, although you won’t have the CGT issue by transferring the asset into the structure, all future gains will be subject to tax PLUS you lose your principle residence exemption.

Further, you don’t avoid the bankruptcy clawback rule which means you can still be vulnerable up to the next five (5) years.

However, there are so many questions and considerations on this strategy which is why you always need advice from a professional.

PRO TIP: Our 5th rule of asset protection is to separate structures between various uses. We educate our clients to separate real estate from non-real estate investments. 

Otherwise, if one of your trusts gets sued and everything you have is owned by it, you could easily lose everything you have. 

By contrast, when you use separate structures it becomes a maze that safeguards your assets. This way, if someone comes after your house … yet all your non real estate assets such as shares, cryptocurrencies, precious metals or cash are stored in a separate structure, it becomes tricky to steal that from you as the assets are owned by separate entities.

Strategy 3: Create a Security Over Your Property

The third strategy one may consider is to create a security. This works well if you’ve already purchased a home (or investment property) in your own / joint name(s).

This strategy involves using a caveat or second mortgage, which is basically another layer of security. 

Most lawyers will recommend for you to put a caveat over your house to protect it from creditors or other thieves. However, the lawyer we see recommends a second mortgage.

What is a caveat?

Caveats are used to protect interests in property. A caveat acts as a “freeze” on the property in question and prevents anyone else registering a dealing with that property that may be contrary to the interest of the person(s) who lodged the caveat.

In Australian property law, a caveat is a warning that someone other than the owner claims some right over or nonregistered interest in the property. Caveats can include ongoing court cases, bad debts or second mortgages.

You can read more about caveats in property law here.

The other property protection strategy one may consider is to create a second mortgage. 

Let’s explore how to protect your house from a lawsuit using a second mortgage…

What is a second mortgage?

A second mortgage means you create debt to protect your house. By securing the majority of your equity in your house via a second mortgage, the property will appear fully encumbered. This will make your home far less attractive to potential creditors.

To simplify this…

SECURITY: Mortgage gives the first right of proceeds over the property when sold before going back to the owner.

FIRST MORTGAGE: The holder gets first proceeds over the property. Oftentimes, this will be a bank who loans the money.

SECOND MORTGAGE: The holders get secondary priority after the first mortgage holder gets paid.

Why Not Become Your Own Bank?

When you have a second mortgage secured over your property, this means even if you were to be sued … your house is protected for two primary reasons. 

Firstly, you get priority after the bank (or first if you own your property outright) and, secondly, it appears there isn’t much equity therefore it’s far less appealing to creditors or plaintiffs.

Think about it…

A mortgage is simply a security to cover a loan from the bank. Why can’t you do the same? You can become your own bank!

This is achieved by creating a second mortgage over your house so if someone sues or comes after you and forces the sale of your property … the first person to get paid is you anyways.

From our experience in the real world, in 99% of cases, as soon as governments or liquidators recognise this they tend to back off and reach an equitable settlement. 

They’d prefer to target someone who is much easier and has no asset protection in place as it’s more time efficient and not so costly.

Another beautiful fact about this method compared to strategy 2 (transferring into a trust) is it’s considerably cheaper. And still retains the CGT and land tax exemptions. 

How a Second Mortgage is Created

How Do I Protect My House From Lawsuits

In simple terms, this is how a second mortgage is created to protect your house:

Step 1: Use (Or Set Up) a Discretionary (Family) Trust

This is done because if someone sues you and the property is forced to be sold, the money ends up going back to you through your discretionary trust.

This method involves setting up a family trust which, through a series of transactions, takes a mortgage over the house.

The beauty of a family trust is no single beneficiary has any claim to the assets of the trust. Therefore, if someone comes after your assets, in most cases the assets don’t form part of your personal assets. Meaning, it isn’t available to creditors. 

The lawyer we see also recommends additional protection by creating an intermediary trust (which you’d discuss with a specialist).

Step 2: Get Access To Funds

This can be done in three (3) ways:

  1. Withdraw from a redraw facility
  2. Access a line of credit from your bank
  3. Use cash reserves

To work out which is best for you, always make sure to get professional advice.

Step 3: Gift Into The Trust

Funds are then withdrawn and cash is put into the family trust as a gift. The money should be physically transferred into the bank account of the trust.

If this isn’t possible for you, discuss with a specialist about transferring the equity itself. Although the protection isn’t as strong, it can still be effective if done correctly.

Step 4: Trust Lends Back The Money

The trust immediately pays the money back physically to you as an individual, but does it as a loan.

The loan is then secured by taking a mortgage over the property. And you become your own bank!

Think about it … if the Commonwealth Bank lent you $1 million dollars they’d want to create a mortgage to protect themselves. Similarly, you’re lending money to yourself from your trust and because it’s a separate entity to you, that trust can take a mortgage to protect the interests of the trust.

To see how this strategy works in practice, watch our free 8 minute video on the 4-step process on how a second mortgage works recorded by Warren Black.

Or if you’d prefer to go into more depth about this strategy, watch our 56-minute video where we discuss in detail everything you need to know about second mortgages.

Final Word For “How To Protect Your Property From A Lawsuit”

The best method for you will depend upon your personal situation.

Hence, always seeking professional advice is imperative to ensure you protect your assets in a creative but legal way that doesn’t interfere with the laws plus won’t cost you a fortune in taxes should that problem arise.


    This information provided by Global Wealth Club is for educational purposes only. It should not be relied upon as tax, asset protection or legal advice. None of the information provided by Global Wealth Club takes into account your personal objectives, financial situation or needs. You must make your own decision how to proceed. If you want general or specific advice that takes account of your particular objectives, financial situation or needs, please seek advice from a licensed professional in the area such as an accountant, lawyer or similar professional.