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If you count all your assets, you’ll always show profit.
Brian Tracey
You may think that only the super wealthy need to worry about asset protection planning. But the truth is that if you don’t have millions, you may be at even greater risk.
Asset protection planning is not something you can ignore until something unexpected happens. Once you are under threat of a lawsuit, it’s likely too late to protect your assets. That’s why having an estate planning attorney consultation early is an important factor in planning your assets well.
1. Invest In Insurance
Insurance is always the first line of defense when it comes to asset protection. Anyone can file a lawsuit against you at any time and basically for any reason. And whether you are ultimately found at fault or not, defending yourself in court can be extremely costly.
The insurance coverage you purchase should not only pay damages if a lawsuit against you is successful, the policy should also cover the cost of hiring a lawyer to defend you in court, whether you win or lose your case.
2. Take Advantage Of Statutory Exemptions
Another way to protect your family’s assets is by taking full advantage of federal and state laws that make certain types of assets “exempt” from creditor claims and judgments. Depending on the state, the availability and amount of protection offered by these exemptions can vary.
Federal and state laws also consider many retirement plans, such as 401(k)s and IRAs, as exempt assets. Additionally, some states offer significant, or complete, exemptions for life insurance policies and annuities, as well.
3. Use The Right Business Entity
Owning a business can be a major wealth-generating asset for your family, but it can also be a serious liability. In fact, without the proper protection, your personal assets are at serious risk if your company ever runs into trouble.
However, structuring your business as a limited liability company (LLC) or corporation is typically the best move for most small businesses. When properly set up and maintained, both entities create an impenetrable barrier between your personal assets and your business activities.
If you own any kind of business, even just a side gig to earn extra income, you should consider setting up a protective entity to ensure any liabilities incurred by your company won’t affect your personal assets.
4. Create A Proper Estate Planning In Place
Although each of the above scenarios are mere possibilities, there is one certainty in life death. It’s coming for all of us, and given this fact, your eventual death or your potential incapacity from a serious accident or illness before you pass away is the biggest risk to your family’s assets.
If you become incapacitated or die without proper estate planning in place, your assets and family will face a number of potentially tragic outcomes.
To this end, planning in advance for the inevitability of death is one of the greatest gifts you can give those you love most.
