It takes a lifetime to accumulate assets. However, it doesn’t take even a few months to lose all your hard-earned wealth if you’re not careful. Asset Protection is about strategies to protect your assets against lawsuits so that you don’t lose everything you’ve earned in your life.
The primary aim of asset protection is to ensure you have something left for you despite legal claims by creditors. If you have a proper asset protection strategy, you’ll limit creditors’ access to your valuable assets.
Not all individuals are equally vulnerable to losing their assets. Professionals like doctors, real estate investors, and entrepreneurs have a higher risk of losing their assets than others.
However, many individuals are vulnerable to probate. Thankfully, there are reputed companies like Mile High Estate Planning, that can help individuals to either avoid probate or successfully deal with probate.
What are the things you must know about asset protection? Let’s find it out.
1. Asset Protection Strategy Is Only Effective Before You Get Sued
Many people don’t think about the risks the future holds. They regret it when they’re in the middle of chaos. An asset protection strategy is only valid before a claim or liability arises. A definite asset protection strategy can help you reduce the risk of lawsuits. An effective asset protection structure acts as a strong deterrent.
2. Your Personal And Business Assets Are Not Separated By Default
One can start a business right away without registering a corporation. You can efficiently operate a business in the form of a sole proprietor or a general partnership. However, people don’t realize that these business structures have unlimited liability. There’s no distinction between your personal assets and business assets. This means that creditors can make claims on all your assets.
3. Registered Corporations Offer More Security Than Sole Proprietorships
Having registered corporations will help you separate your assets from your company’s assets. The corporation structure offers limited liability, which restricts the ability of creditors and lawsuits to impact you personally.
Some popular forms of corporations are C Corporations, S Corporations, Limited Liability Companies (LLCs), and Limited Partnerships. Consult a reliable business consultant before choosing the right form of structure for your business. You’ll also need the help of multiple agencies to start and operate your business smoothly.
4. There Are Corporation Formation And Discounted Asset Protection Scams
You may have heard about discounted asset protection and corporation formation scams in the market. Some companies may offer to form your LLC (Limited Liability Company) or corporation for as low as $99. These companies only give you a sealed document and disappear. Try to find a reliable agency or attorney to form your corporation and to structure your assets.
5. Asset Protection Laws Vary By State
You need to be aware of the asset protection laws of your state. The laws vary and affect all areas like IRA (Individual Retirement Accounts) exemption, HSA exemption, Homestead exemption, Annuity cash value exemption, LLC charging orders, Burden of Proof for malpractice, etc. For more information, check this resource.
6. Insurance Is Not A Replacement For Asset Protection
Insurance can’t replace the need for an asset protection strategy. Insurance supplements asset protection and vice versa. Insurance will safeguard you against fraudulent transfer claims and other specific lawsuits. However, it doesn’t offer protection against every type of lawsuit that may come your way. With that said, you must choose the right insurance package for your needs.
7. Bankruptcy Is Not The Safest Route Anymore
There was a time when business owners could get rid of all their debts via bankruptcy. But that’s not the case anymore. Since 2005, the bankruptcy laws have changed. Now bankruptcy provides debtors with fewer benefits. The state homestead exemptions are now limited.
On top of that, some new bankruptcy code provisions can make certain parts of your asset protection plans ineffective. Bankruptcy attorneys can now argue strongly to make you vulnerable to losing more assets.
8. Asset Protection Is For Everyone
Some people feel asset protection is only for wealthy people, entrepreneurs, and some other professionals involved in risky professions. But the truth is that asset protection is for everyone.
Moreover, you don’t need to pay a hefty sum of money to structure your assets. Therefore, it’s better to pay a small sum of money to avoid the risk of losing your properties in lawsuits.
9. Your Spouse Can Help You Protect Your Assets
If you’re in a risky profession, it’s smart to transfer some valuable assets as your partner’s separate property. Your creditors won’t be able to come after your spouse’s assets if you’re facing a lawsuit.
Knowing about asset protection is a must for every individual. Sadly, many people aren’t aware of the importance of asset protection. Because of their ignorance, people end up losing a sizable part of their assets. Some people even lose their whole life’s earnings.
Having the right asset protection strategy can help you keep a significant part of your valuable assets safe and secure. Secure your assets and help your loved ones protect their assets too.