Asset protection may sound like something that only the ultra-wealthy should worry about. However, even if your total net worth doesn’t amount to billions, you may want to ensure that your family can enjoy your hard-earned assets even when you died.
This legal concept involves coming up with viable strategies to guard your wealth. It’s the section of financial planning that protects your assets from creditors, particularly valuable assets without engaging in illegal practices of concealment, contempt, fraud, and tax evasion.
You can choose from a wide array of companies that provide asset protection services, and some even work internationally. For instance, a company like Mile High implements global solutions for their clients. To give you more practical ideas on asset protection, here are some of the reasons why you need it:
It may be morbid to think that accidents and other unfortunate incapacitating events may happen to you, but it’s a reality of life. There’s always a possibility that something will go awry and leave you unable to continue managing your assets.
It’s wise to foresee these types of situations, especially when you’re the primary income-earner in your family. Naming someone you trust to take over your assets can ease your worries, and it ensures that your properties and possessions are managed well. This allows you to focus entirely on recovery and recuperation. Here are some tips to keep in mind when you want your assets to be protected.
- Plan Ahead – As with anything that safeguards your future, you must strategize on how to protect your assets today. You shouldn’t wait until you receive a liability claim before you preserve your assets because it can be misconstrued as a fraudulent transfer.
- Acquire Asset Protection Insurance – You should also be aware that asset protection is different from insurance. While their premise is relatively similar, you need both to guard your wealth holistically.
- Be Careful of Using Tax and Estate Planning Strategies – Keep in mind that the tactics you employ for tax and estate planning might not work well with asset protection. For instance, gifting your beneficiaries is a common practice, but it wouldn’t work for a long time because the process might be considered as a fraudulent transfer.
- Make Sure You Understand the Plan – A lot of asset protection plans are so complicated that even the owner doesn’t know how to explain it. It can be easy to disregard this aspect and leave it to your executors. Still, you must be able to explain the process thoroughly and clearly to alleviate any suspicions that you’ll be encountering in court if you are facing a lawsuit.
Ward off Frivolous Business Lawsuits
If you’re a business owner, there’s a risk of getting slapped with a professional liability claim from people who want to take advantage of your wealth. Asset protection can help safeguard your enterprise from these situations.
For instance, you may have unwittingly used a rift from a well-known song for the TV advertisement of your company. However, the fact that you didn’t know it was the intellectual property of another artist won’t be a sufficient reason when you get sued for damages.
While an asset protection plan can’t prevent you from facing a lawsuit, it can help make sure that your business and other properties won’t be seized by the court immediately when you lose the case. Other possible professional liabilities include accusations of sexual harassment, employment discrimination, malpractice, and breach of contract.
Protect from Personal Liabilities
Divorce is one of the most common threats to a business owner’s financial status. Your soon-to-be ex-spouse may have extensive insider knowledge of your wealth. They can even send you to jail if proven that you failed to pay child support.
An asset protection plan can keep your professional and personal assets separate. With this and a pre-nuptial agreement, you safeguard your business’ properties and possessions against your individual liabilities.
Take Care of Your Beneficiaries
You can defend your hard-earned wealth even after when you’re gone with an asset protection plan. With this, you can structure your inheritance in a way that ensures it won’t be lost if your beneficiaries get divorced or file for bankruptcy.
Asset protection is a legal strategy that can help you take care of your wealth if you become incapacitated. You may also face lawsuits in both your personal and business life, so having this plan can help safeguard your properties and possessions against illegal seizures by the court or creditors. Lastly, you can help your beneficiaries through it as well, especially if they need a little bit of assistance in managing their inheritance.