The hard truth: accidents can happen, and anyone can face a lawsuit. It’s important to plan as best as you can to minimize any risks to your assets and future. A great tool to get you started is Asset Protection Planning. It helps you get ahead of potential threats before they become a reality.
What is Asset Protection Planning?
According to NerdWallet, Asset protection planning is “a set of strategies and planning techniques used to legally shield individual or business assets from legal judgements, seizure, taxes, creditor claims, or unwanted beneficiaries”. It may be considered a fraud to protect your assets to avoid any kind of existing legal obligation.
How Do I Start An Asset Protection Plan?
Create an asset protection plan before any legal issues arise. We’ll highlight the best asset protection planning tips to help you get started.
Tip #1: Strengthen Your Defense with Liability Insurance
One of the easiest and most effective ways to protect yourself is by having the right insurance policies in place. Insurance policies not only cover damages if someone sues you, but they can also possibly help cover legal fees. If you don’t have an umbrella policy, we recommend talking with an insurance agent about which one may be right for you. Insurance policies provide a great safety net for your assets. Compared to other asset protection strategies, they are relatively affordable. It’s also important to review your policies periodically. Make sure everything is up-to-date and nothing has changed without your knowledge.
Tip #2: Contribute to Your Protectors: 401(k) or IRA
A great legal safeguard against your financial assets are 401(k)s and IRAs. They offer protection from creditors under federal law. Contribute to your 401(k) plan with your employer, or an IRA if your employer doesn’t offer a 401(k). This way, you save money for your future while protecting it.
Tip #3: Use an LLC to Protect Rental or Investment Property
Setting up a Limited Liability Company (LLC) can be a smart way to separate personal assets from business-related risks if you own rental or investment real estate. If you do, inside liability and outside liability are two types of liability you should be aware of. According to Private Counsel, Inside liability is “risk associated with the debts and obligations of the business,” and Outside liability “deals with the debts and obligations of the owners.” Both types of liability are important to understand and consider for rental or investment property owners.
If you properly form and operate an LLC, you can prevent personal creditors from accessing the property inside the LLC to settle unrelated debts. This can also vary from state to state, while some states provide additional protections. However, if real estate investments are part of your financial plan, a great first step is to work with an attorney to ensure you are protected from both types of liability.
There’s No Better Time Than Now – Protect Your Assets and Your Future
Your assets deserve as much protection as you do. Our team can help you build the best asset protection plan based on your situation and your goals. We aim to protect you and your loved ones from unforeseen risks. Contact us today and let’s talk about the best plan for you!
