Can you bubble-wrap your assets to protect them? This is bulky, cumbersome, and just not realistic. However, there are other ways to be proactive and protect what is most important to you and your business from being sued. What if you are a small-business owner and someone falls and gets injured at YOUR place of business? They could try to sue you professionally and personally. If you personally are sued, then it could devastate your family and impact your business.
Asset protection planning is not just something for ultra-high-net-worth people. If you are a multi-millionaire, a $50,000 judgment against you might not be that big of a deal. But for a family with a modest income, savings, and home, it could be devastating.
Once you are being threatened by a lawsuit it is too late to protect your assets. Similar to Estate Planning, asset protection planning is something that you need before it is going to impact (and probably change) your life. It is not one-and-done either nor is it something you should DIY. If you have a plan in place when was the last time you reviewed it? Do you still feel that the same people should receive your assets? What if laws have changed since your plan was last reviewed?
Below are 4 tips to help determine what the best asset protection plan is for you, your family, or your business.
1. Insurance – Invest or Take the Risk Without It?
Insurance is the first line of defense when it comes to asset protection. A lawsuit can be filed against you at any time and for any reason. If your case ends up in court, then there might be more dollar signs in your future than you expected.
The insurance coverage you purchase should not only pay damages if a lawsuit against you is successful, but the policy should also cover the cost of hiring a lawyer to defend you in court, whether you win or lose your case. And because a large judgment could exceed your policies’ coverage limits, you should also seriously consider buying umbrella insurance.
In the unexpected event, that your insurance policy is maxed out, an umbrella policy will help cover the unexpected expenses. We can review your current policies to ensure to help protect you. We can be reached at hello@yolofskylaw.com or schedule an intro call https://yolofskylaw.com/call/
2. Advantages Of Statutory Exemptions
Another way that you can fully protect your family or business, is by taking advantage of some of the state and federal “exemptions” from creditors and judgments. The availability and the amount of protection that is offered from these exemptions can vary by state.
An example, many states offer a homestead exemption, which protects a certain amount—or even the full value—of the equity you have in your primary residence from creditors. If your state provides a generous homestead exemption, paying down your mortgage could protect funds that would otherwise be vulnerable.
Similarly, federal and state laws also classify 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.
Even though such exemptions won’t offer you complete protection, they can provide significant protection for certain assets. Additionally, using statutory exemptions is something that can be accomplished without investing anything—all that’s required is for you to understand how best to structure your investments to take advantage of these protections.
3. Do you have the Right Business Entity to Protect Your Assets?
Having a business might be a life dream which is important to ensure that you have the right business entity structure in place. Owning your own business is one of the best ways to generate major wealth though it can be a serious liability. Without proper protection, your personal assets are at serious risk if your company runs into trouble. Indeed, if your business is currently a sole proprietorship or general partnership, you are personally liable for any debts or lawsuits incurred by your business.
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 a nearly impenetrable barrier between your personal assets and your business activities. Creditors, clients, and other potentially litigious individuals can go after assets owned by your company, but not your personal assets. Additionally, having the right business insurance in place can help shield your business assets from such claims. As said above, insurance is the best first defense and often the cheapest money you can buy.
If you own any type of business, even just a side hustle to earn extra income, consider setting up a protective entity to ensure any liabilities incurred by your company won’t affect your personal assets. We can help you select, put in place, and maintain the proper entity structure for your particular business operation. If you haven’t done this already, schedule an intro call with us by clicking here to ensure your business doesn’t put your personal assets in jeopardy.
4. Planning for the Future – Proper Estate Planning
All of the previous scenarios are possibilities however, there are two things in life that are certain – death and taxes (thanks for the reminder Benjamin Franklin). Keeping this in mind, there is the potential of incapacity from an unexpected accident or illness before you are gone. This is the biggest risk to your family’s (and possibly the business’s) assets.
If you become incapacitated without a plan in place prior, there is a grave risk your family and business could face with potentially devastating outcomes. Without the proper planning, your assets will probably get stuck in the court system, which could result in those assets passing to family members you would never want inheriting them; or if the assets eventually do pass to the loved ones you would want inheriting them, those assets could be seriously depleted or even lost. The greatest gift you could give to your family before you are gone is to plan for the future.
You have worked long and hard to get to where you are now. Surely, you don’t want to be taken away from your family or business.
Now, is the best time to start planning. Schedule an introductory call with us by clicking here or call us at (954) 237-4011. We can help protect your physical and intangible assets for years to come without using the bubble wrap.
***Bonus Tip***
In our nod to some of the many great things from the Marvel Cinematic Universe, the post-credits scenes have some treasures, spoilers, and teasers for future stories. Here, the truth about asset protection is that it’s a terrible way to describe what actually needs to get done. Also, the phrase “asset protection” is a signal to collections attorneys that there are assets to protect.
The truth about this ugly phrase is that three things comprise high-quality asset protection work. These categories are liability protection, privacy, and tax planning. You might never have to defend a lawsuit, but Uncle Sam and his deputy, the IRS, will come every year asking (to put it mildly) for their share of your hard-earned wealth. Do you want to give up more than the minimum required?