There is always the risk of losing your assets from creditors filing claims, an unfairly adjudicated lawsuit, claims arising from damages, bankruptcy, and even divorce. However, you can avoid these threats by implementing solid asset protection strategies.
The importance of asset protection cannot be overstated. It can help shield the assets that you’ve worked long and hard to accumulate. It is a proactive measure that will ensure that you get to fully enjoy what you’ve earned. Although you are not praying for these risks to befall you, you should consider and invest in asset protection long before the threats come knocking at your door.
Common Ways to Protect Your Assets
There are several ways to shield your assets. Below we discuss the five most common asset protection strategies.
1. Use an appropriate business entity or structure
Regardless of the size of the business you’re operating, make sure that you shield your assets in case of claims by establishing the appropriate business structure. A cardinal rule in doing business: never mix business and personal assets. They must be kept separate. To achieve this, you need to establish the right business structure, such as a Corporation, LLC, or partnership. Operating a business under a sole proprietorship exposes your assets to claims. A sole proprietorship does not shield your assets. In the case of liabilities arising from your business operations, they can easily spill into your assets. Choosing the right business entity requires a tax professional or an accountant to review and evaluate your business dealings getting familiar with the most common business structures, such as an LLC will help you protect your assets.
2. Invest in insurance
Insurance is vital in protecting your assets. Unfortunately, there are still some business owners that don’t consider insurance as a priority. Many types of insurance offer protection for different assets, such as automobile insurance, property insurance, etc. Professionals working in high-liability occupations, such as medical professionals, lawyers, and real estate professionals, also need insurance to protect their assets in case of claims. However, it’s not enough that you take out insurance, you have to regularly check its coverage to see how much of your assets are insured.
3. Ensure proper asset titling
A property can be seized through titling. Make sure to check your assets’ titles are in order; that includes your home, office space, and other properties. Proper titling ensures that they are shielded in case of an attempt to question your ownership. Check individual state laws regarding titling to know the appropriate plan for your properties. Take note that some states have titling exemptions which you might need to consider.
4. Transferring ownership
Sometimes it’s best to get rid of assets that are being threatened instead of holding onto them. A good way to skirt creditors is to transfer ownership of your assets into a trust that is accessible by an appointed party. It’s a good way of safekeeping assets. You might want to consider opening an offshore trust account to further isolate your assets while maintaining full control of them. Another way of releasing ownership is by ‘donating’ or ‘gifting’ the asset to a family member or trusted individual. However, this might entail costs and taxes. Consulting a lawyer to help you choose the best way to release or transfer ownership of your assets.
5. Start a retirement plan
We work hard to accumulate assets for us to enjoy later in life or for our loved ones to enjoy. Protected by federal and state laws, a retirement plan can guarantee that you’ll enjoy these funds the way you intend to. With a retirement plan, you make accounts and move the assets or money you don’t need into the retirement plan. Take note that when you move your funds into these retirement accounts, you will not have access to it until you’re of age. Again, it’s essential to seek the counsel of a lawyer to explore applicable laws in your state.
Asset protection is protecting yourself. As such, it should be prioritized and not delayed. Having solid asset protection can make you feel more secure and comfortable. Regularly review your situation to see potential weaknesses and errors. Plug all possible vulnerabilities and avoid making yourself the target of litigations, creditor claims, and frauds. Getting the advice of a professional asset protection specialist can help you through this process.