Asset Protection Planning is when you employ specific relevant strategies to safeguard your wealth. This protects you from any claims a creditor might make towards your assets. In essence, it’s part of financial planning.
Building a fortune and becoming wealthy can take many years. However, losing all the wealth that you’ve accumulated can happen within months. No one knows about tomorrow. Therefore, investing in asset protection is essential before you find yourself in financial problems. This can help reduce the risk of losing any of the assets you’ve worked hard for.
Meanwhile, some people choose to protect their assets because anyone is susceptible to getting sued nowadays. The aim of protecting your wealth is to prevent your assets from getting seized in case a creditor files a legal claim against you.
Significantly, asset protection helps you avoid going bankrupt. If a lawsuit is filed against your business, chances are high that you won’t pay more than is required. Moreover, the creditor cannot easily access your wealth.
But, if things don’t turn favorably your way and you can’t help but file for bankruptcy to prevent yourself from losing virtually everything, you may need to consult with firms such as Bankruptcy Law Center to help you navigate this complicated web of technical jargon and complex rules. They’ll help you through this challenging journey; even if you’re unsuccessful with your enterprise and investments, you still have a chance to save your credit score and keep your assets so you can build a better future for yourself and your family.
On the other hand, one of the most renowned and reliable asset protection tools you can use to safeguard your family’s wealth is Nevis Trust. You can also seek advice from a legal professional to help you develop a plan to guard your wealth and manage it properly.
Here are some of the most important things that you should know about asset protection:
-
The Basics Of Asset Protection
Asset protection is crucial since it protects you from taking part in illegal processes like hiding your assets or concealment, tax evasion, and fraudulent transfer. It’s advisable to start the asset protection process before any risk, like being sued, occurs. Otherwise, if you do it after the chaos has taken place, it won’t help.
There are other ways to protect your assets apart from trusts. This includes getting limited family partnerships and accounts receivable financing. Meanwhile, the following are the main steps involved in protecting your assets:
- Identifying The Creditor: It may be a government institution. Thus, it’s important to brace yourself.
- Getting To Know The Debtor: You may share the property with your spouse; thus, they become part of the whole procedure.
- Going For A Relevant Claim: There are several types of claims. For example, the dischargeable ones are specifically meant for personal assets protection.
- Determining The Assets To Safeguard: Choose the asset you want to protect. For instance, you can protect your home through the homestead exemption claim. Thus, there’s an extremely low likelihood that the creditor can gain possession of your home if you haven’t paid a debt in this case.
These are some of the basic things about asset protection. Getting an expert to guide you to make proper and informed decisions would be best. Once you’ve figured out all these steps, then you’re good to go.
-
You Are Required To Hire An Estate Planning Lawyer
Learning how to best safeguard your possessions can be a time-consuming process due to the complexity of the subject. This isn’t something you can do on your own unless you’re a trained professional. That’s why you need an estate planning attorney with the proper experience to make things easier.
An estate planning lawyer can advise you on some of the legal issues pertaining to family wealth. Here are some other things they can help you with:
- Guides you in writing a legal will.
- Advises you on the best asset protection trust to go for.
- Helps you choose suitable beneficiaries for your assets.
- Gives you advice on different ways to minimize the estate tax amount that you pay.
On the other hand, estate planning involves the different procedures you must undertake to protect your family’s wealth. You can do this through limited liability entities or even for trusts—whether asset protection or irrevocable ones.
Meanwhile, the idea of estate planning is to withhold certain assets from being identified with you. Thus, your name is revoked from them. The main aim of doing this is to protect these assets in case you get into financial trouble. As a result, no creditor can claim possession of these assets since they don’t know if they belong to you.
-
Getting Complete Asset Protection Is Impossible
Of course, you’d want all your assets to be protected such that no creditor or third party can claim or possess them. Unfortunately, that may not be possible. It’s important to realize that asset protection is a part of financial planning.
Any financial plan has risks that are attached to it. They can either be in the form of litigation or loss. More so, it’s impossible to prevent hazards from occurring entirely. However, you can reduce these threats by taking specific measures.
Meanwhile, you can’t entirely count on your strategies to protect your assets because the court might decide against you. This means that if the creditors take you to court for failing to clear some of your loans, they can win the court proceedings. When this happens, you’ll have to give them some of your assets as directed by the court.
However, this isn’t to say that this will happen every time, but it’s just an eyeopener to let you know that you can’t get 100% protection. Nevertheless, asset protection is good because it helps minimize the risk of lawsuits. Therefore, before you go for any asset protection strategy, it’s essential to gauge the available options and choose the one that’ll offer optimum protection.
-
Learn More About Unlimited Liability Businesses
As long as you’re operating a partnership or sole proprietorship business, you need to know they have unlimited liability. This means that if your business has a debt, the creditor can use your assets as security for that loan. This differs from a public limited company or corporation, where the company’s assets are separate from their owners.
So, if your business has unlimited liability, you ought to be careful because one mistake can cost you all your assets. Hence, to prevent your assets from being used to settle debts owed to creditors, you must take every precaution to keep them safe. Alternatively, you can convert your business into a corporation to avoid putting your assets at risk of being taken by creditors.
-
Use Your Partner’s Name On Some Assets
Depending on your business type, it would be wise to use your partner’s name on some of the assets. This is applicable mainly if you’re doing high-risk activities like deep sea diving, sky diving, or rock climbing. In this regard, it would be extremely difficult for creditors to reach all of your assets if some of them are under your partner’s name.
By law, any property under a married couple’s name can’t be seized by creditors, especially if the debt is only under one spouse’s name. A creditor, for example, won’t be able to claim a residential property of a debtor unless they have a claim on both spouses.
Meanwhile, a prenuptial or postnuptial agreement can be of great help if you’re married. When you decide to go for this method, ensure that the assets have less exposure to risks. Therefore, you need to make sure that they’ve been accounted for as separate property.
On the other hand, you must bear in mind the consequences of transferring your property to your partner’s name. If you divorce, you’ll have a hard time dividing your assets. However, you should be willing to take chances, so long as you understand that every choice has implications.
-
An Insurance Cover Can Help Protect Your Wealth
Insurance helps protect you or your property in case a risk occurs. In fact, having an insurance cover is one of the most effective ways to protect all your assets
Here are some of the most common types of insurance:
- Business Insurance
- Fleet Insurance
- Limited Liability Insurance
- Property Insurance
- Indemnity Insurance
Most of the insurance covers mentioned above can help protect your wealth. For example, if you have property insurance and your house is devastated by fire, the insurance company will compensate you for the damage. Meanwhile, paying the premium on a regular basis ensures that the insurance company will help you in the event of a loss.
Any property is susceptible to damage, theft, and hazards. If your property means so much to you and if it costs a considerable amount of money, you need to have it insured. Everyday life is filled with risks, such as accidents, natural calamities, damage inflicted on purpose, and many others. An insurance policy can help you recover faster in the face of such unfortunate incidents.
-
Different States Have Varying Asset Protection Laws
It’s fundamental to know the asset protection laws that apply to the state that you’re living in. This is because these government policies vary depending on the state you reside in. Laws like homestead and retirement exemptions are examples of laws that are applicable in almost every state.
In addition, it’s essential to understand which assets can be protected from creditors and which ones can’t. Meanwhile, there are other common assets that creditors can be exempted from. This includes household appliances, cars, and college tuition funds.
Nevertheless, learning more about your state laws and all tax-related policies is essential to determine the asset protection claim you’ll go for.
Conclusion
Asset protection is fundamental in today’s business world because of the growing risks involved. Nowadays, you don’t know when you’ll get sued, have an accident, or go bankrupt.
Thus, it would be best to use strategies like getting insurance, knowing the assets you want to protect, and understanding your state laws before choosing an asset protection strategy. That way, you’ll make a proper decision that’ll help protect your wealth in case any chaos occurs.