Secure What’s Yours: 10 Serious Tips for Strong Asset Protection
07 Sep 2019
Are you concerned about losing valuable assets and want to secure them at all costs? Here are must-know tips for proper asset protection.
Asset protection is one of the key aspects of proper asset management. Asset protection will legally shield your money, investments, or property from seizure by creditors. A lifetime of savings and accumulated wealth may dissipate within the blink of an eye should you be sued.
Are you concerned about losing valuable assets and want to secure them at all costs? Here are 10 must-know tips for proper asset protection.
1. Plan in Advance
Now is the right time to protect your assets before a claim or liability comes up. Courts tend to make their decisions favorable towards those who have protected their assets in advance. Take action now and make the necessary moves to protect all your assets.
Any efforts at securing your assets after you’ve been sued will prove pointless by the law of fraudulent transfer. It’s like trying to fix a wall crack after the wall has already collapsed.
This, however, does not deter most people from trying to protect their assets after a legal claim is made.
2. Form a Limited Liability Company
Opening a limited liability company (LLC) is a crucial step to protecting your personal assets from the claims of creditors. Opening an LLC will create a new business entity that’s not legally bound to its owners.
The separation between the company and its owners is referred to as limited liability protection. When the LLC is not able to pay its debts, the creditors can only claim the assets tied to the LLC, such as bank accounts and properties.
However, personal assets belonging to the owners are considered safe.
3. Research Asset Protection Strategies
Opening an LLC does not give you complete guarantee from possibly losing your personal assets to creditors. It’s important that you look up the possible avenues you might use in protecting your personal assets from all sorts of claims.
Laws regarding asset protection differ across the 50 states in the USA. For example, some states allow people to put their assets in a trust secure from creditors.
Consult with a lawyer who specializes in financial planning so you can make a more detailed decision in how you’ll shield yourself from business liabilities.
4. Diversify Your Assets
Try your best to set up multiple entities for different segments of your estate. This is one of the most important steps to making sure your assets are secure.
Having 6 rental properties, a hotel, a construction company, and a restaurant franchise all under one company is courting disaster. A lawsuit on one company might expose all existing assets.
The solution to this conundrum is to diversify your assets and other businesses across one or more limited liability companies. As for the stock owned in your companies, hold them in a limited liability limited partnership (LLLP) or an asset protection trust.
5. Consider Going Offshore
Albeit somewhat controversial, having an offshore asset protection trust is completely legal and ethical. When done in the right way, moving your assets to an offshore asset protection trust might just prove to be a power move.
This is because once your assets are held by a safe international financial institution, they’re out of your local courts’ jurisdiction. It’s even better when done early in advance to completely prevent creditors from accessing your assets.
6. Get the Right Business Insurance Cover
Insurance is a fundamental part of any business and should be considered in your startup budget. Insurance will give you the freedom to take care of an incident involving your business while giving plaintiffs a different target to focus on.
Insurance service providers offer different types of coverage for various types of businesses; for example, insurance regarding rental properties compared to insurance regarding a retail store.
As an entrepreneur, you have to be sure you get the right kind of insurance policy coverage or risk avoidable loss.
7. Contemplate Getting the Homestead Exemption
The protection afforded to personal residences by the homestead exemption is possibly the most powerful exemption available. The homestead exemption works to protect a certain amount of the value of a person’s home from a creditor and is available in most states in the U.S.
8. Have Some Assets Put Under Your Spouse’s Name
Asset protection under marriage is a strategy by which personal assets are held as separate entities by the partner who’s less prone to risk. If one spouse lives a hazard-bound lifestyle or their occupation is similarly risky, having the assets placed under the other spouse’s name is a strategic idea.
With this move, business creditors are unable to access the assets of the other spouse. Another benefit to this move is that the fate of each property can be decided through a prenuptial or postnuptial property agreement.
This means you and your spouse will have full control over your property as stipulated by the contract agreement.
9. Explore the Option of Tenancy by the Entirety
If permitted by your state, you have the option of titling your residential property as “tenancy by the entirety”. This means in the event that one spouse is sued, creditors cannot access the owned property.
All you have to do is make sure the state recognizes your marriage and that your property is titled properly. Examples of states that allow tenancy by the entirety are Virginia, Wyoming, Tennessee, Missouri, and Oklahoma.
10. Avoid Being Extravagant
Publishing pictures of a lavish lifestyle on social media or carrying a reputation for driving flashy sports car will make you a target. It’s important to exercise discretion.
Boasting about financial freedom may boost your ego, but might work against you in the long-run.
Asset Protection Secures You and Your Family
There are plenty of risks to your financial security. For example, incapacitation might render you unable to take care of your wealth or investments. If you’re an entrepreneur, you run the risk of losing personal property should your businesses undergo financial challenges.
Familiarize yourself with the legalities that concern asset protection in your state of residence. Proper asset protection strategies such as keeping businesses, assets, and personal finances separate will help keep your personal assets from the reach of business creditors.
Contact us if you need an investment adviser or you’re in need of advice on tax minimization, estate planning, and any insurance.