Business owners focus so much on accumulating wealth but spend very little time protecting their assets. But the sad truth is that we live in a lawsuit-frenzy society and as a business owner you are ever vulnerable to many risks that can put your assets – home, savings, and business – at stake.
Why asset protection is vital?
Nowadays, having a solid asset protection plan is not an option but a necessity. And this is true not just for business owners but to anyone who may be perceived to own substantial assets. If you are a potential target of creditors, lawsuits, or any other legal threat, planning asset protection should be a priority.
Basically, asset protection strategies help safeguard your assets and wealth from potential attacks in the future. Contrary to what many people think, it is not only your savings and properties that may be at risk in case of an unfair adjudication.
Everything that is of value, including business interests, real estate, investment properties, commercial properties, intellectual property, and other properties such as cars, art, boats, art, and jewelry, can be targeted by creditors. The good news is that there are specific asset protection strategies that can help secure a different type of assets. When you implement the right measures, you can rest assured that your assets are safe even in the face of lawsuits and liabilities.
Who needs asset protection?
A common misconception people have regarding asset protection is that an individual first needs to have significant wealth to start devising a plan. But the reality is that lawsuits can be filed not just against businesspeople but to anyone, regardless of backgrounds and levels of affluence. As long as people think that you own substantial assets, you can be targeted with frivolous lawsuits.
Some individuals who may need asset protection include:
- Young entrepreneurs who wish to secure their assets before entering into a risky venture;
- Retirees preserving their assets for their beneficiaries;
- Individuals protecting their properties from growing medical bills;
- Individuals engaged in a profession with a high degree of liability (medical professionals, real estate investors/developers, lawyers, financial advisors, accountants);
- Debtors and/or guarantors;
- Business owners running a business with the poor financial state;
- Individuals from the affluent class with assets from around the world;
- Married couples with a souring marriage that is heading to divorce;
- Individuals facing a possible tax or other government liability;
- Business owners whose business may be affected by new laws or create new liabilities not covered by any insurance;
- People about to receive or have gained a substantial amount of wealth through inheritance, vesting event, corporate success, business acquisition, etc.; and
- People expecting a lawsuit or at high risk of being sued.
Basically, everyone who has accumulated any asset will eventually need asset protection.
How to protect assets?
As mentioned above, different strategies can be used to protect your assets. They can be classified either as domestic or offshore.
Domestic asset protection strategies involve the use of domestic laws and business structure. The simplest is choosing the appropriate business entity, such as corporations, limited partnerships, and trusts. As stated by an asset protection consultant at CS&P, by registering a business entity, you can benefit from having a corporate veil that completely segregates business and personal assets. This protects your assets in case of lawsuits and other liabilities.
Other asset protection measures that leverage domestic laws include the proper use of contracts and agreements, purchasing appropriate insurance policies as well as umbrella insurance, segregating assets and assigning them to a spouse, and using homestead exemption. A comprehensive estate and trust planning can also provide a solid form of asset protection. It is recommended to do trust planning before you establish a new company.
Offshore or international asset protection strategies are among the most successful methods to preserve your wealth. These are very confidential and secure ways of shielding your assets. This involves the establishment and transfer of assets to a corporation or trust based in a foreign territory. However, the process can be quite daunting, especially for those unfamiliar with its intricacies. It requires the help of experienced asset protection specialist to ensure that the process complies with the laws of both the origin and destination territory.
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