Asset protection is important for many reasons and is particularly critical if you own a business or have considerable wealth. A comprehensive asset protection strategy can help to insulate your business and assets from risks such as claims by creditors and lawsuits. Failure to protect your assets could have an adverse impact on your wealth if it is exposed to risks. To keep your assets safe, consider these four strategies:
Have liability insurance
Having liability insurance should be the first line of defense when it comes to protecting your assets. Here, it is recommendable to make sure your umbrella cover is equal to your new net worth. For example, if you are about to inherit a 20 million dollar estate, increase your liability insurance to the same amount.
Some categories of coverage you may need to safeguard your assets include but are not limited to homeowner insurance, workers compensation insurance, long term care insurance, auto insurance, and commercial liability insurance.
Use business entities
Business entities help in separating assets so that if something happens, you do not have to lose all your property at once. Lack of creating an entity, such as a corporation or limited partnership, could see a small legal dispute cost you all your wealth. In addition to the ones mentioned, other business entities to consider are general partnerships, limited liability companies, and sole proprietorships.
Formalize informal partnerships
In business partnerships, you are equally responsible for the actions of your partner. This means that your assets can be compromised in case of a lawsuit involving your partner. Formalizing business relationships can go a long way in safeguarding your assets if something happens to your partner.
Asset protection trusts
An asset protection trust (APT) is typically a trust bank where an individual delegates their asset for protection from creditors. Here, the actual owner of the assets acts as a beneficiary while the trust bank becomes the legal owner. Asset protection trusts are commonly used since, in addition to protecting one’s assets, they adhere to the federal tax laws.
Asset protection is critical in ensuring your property is safe from creditors and damaging lawsuits. ProAdvocate Group understands the importance of asset protection and strives to offer legal expertise to help you with legal challenges in this regard. Contact us for more on our professional services.