Importance Of Asset Protection

As a business owner, you’ll surely want the best for your company. You’ve worked hard for so many years to get what you’ve achieved and you can’t just lose everything in a snap. However, if your business faces a big lawsuit and you lost, then, you may also end up losing everything you’ve built. These can include your business and other personal assets. Luckily, there ae plenty of ways that can safeguard your properties, including the process of asset protection.

If this concept hasn’t been so important to you before, keep reading this article to learn what asset protection is and its significance for businesses like yours. Understanding how asset protection works and getting a plan for your business will give you peace of mind knowing that your business continues to operate, even if emergencies arise.

Source: Tresp, Day & Associates, Inc

Asset Protection: What Is It?

Primarily, asset protection refers to a process of safeguarding a business from potential risks such as claims, bankruptcy, lawsuits, and many more. For instance, if you lose a lawsuit, you can easily lose everything which in turn, can impact your family’s financial future, especially when you pass away.

However, in order to better understand what asset protection is, the following are some common strategies you should keep in mind:

  • Trusts – These are considered to be one of the strongest asset protection tools available in the market. When you set up a trust account, your personal assets are being transferred to the trust, which will be managed by a third-party trustee. Although you no longer own these assets, you can still receive their benefits and manage them through the trustee. But if you lose in a lawsuit, the judgment holder can’t run after all the assets in your trust account, thereby saving them for you and your family. Thus, if you want to learn more about trusts, particularly the popular Nevis trust, you can check out for further information.
  • Business entities with limited liability – Another powerful way of protecting your assets against any risks is by forming a business with a limited liability. This is commonly called as a limited liability company or LLC. Generally, LLCs are beneficial for entrepreneurs because they separate your personal wealth from your business. This means that in case your business is facing a lawsuit, there’s nothing to worry because no creditor or judgment holder can seize your personal properties.
  • Retirement Funds – There are specific employer-sponsored retirement plans that can be used to shield your assets from lawsuits, claims, bankruptcy, and even life-changing events such as divorce. For example, when you put money on these plans, you can hold onto them even after you file a bankruptcy. This makes these retirement accounts more well-protected than your other ordinary property from risks.
Source: Medium

Asset Protection: Why Is It Important?

Now that you know what asset protection is, it’s time to get familiar with its importance. As mentioned, asset protection planning is an essential way of protecting wealth from the threats of frivolous lawsuits and other risks.

However, if you’re unsure how asset protection can positively change your life, here’s a few reasons why it’s important to have one:

1. Reduce The Risk Of Being Sued

When all your assets are well-protected, your creditors and other interested parties will hesitate to sue your business or you. That’s because it’ll be difficult for them to seize your property without going through a complicated, lengthy, and time-consuming legal process.

Hence, if you want to lower the risk of being a target of a lawsuit, be sure to find an experienced lawyer who can evaluate your assets and determine which asset protection strategies are the best for your wealth. With them by your side, you can rest knowing that you and your business are free from any lawsuits. 

Source: Mile High Estate Planning

2. Separate Assets Properly

This importance is especially crucial if you want to protect your family. For example, if you and your spouse have a joint account of all your assets, you may suffer in case both of you will decide to have a divorce. According to the law, spouses with joint accounts will get half of the total amount even if the contribution of the other is less.

That being said, it’s important to consider asset protection so you can keep your assets in separate accounts. This means that your spouse. in the event of divorce, can’t get money from you. 

3. Minimize Financial Loss

If you’re running a business, you can benefit from asset protection planning because it allows you to minimize your financial losses. For instance, during tough times wherein your company isn’t performing well financially, there’s a high chance your business will be sued by your creditors.

For that reason, you need to put some asset protection strategies in place to make sure you won’t end up broke.  

Source: April King Legal

4. Provide Protection For Assets Not Included In Your Insurance Coverage

Typically, having insurance coverage offers peace of mind, knowing that you’re protected during tough times. However, your insurance coverage doesn’t cover all your assets and every single situation. That’s because almost every policy comes with exclusions or limits. This is where the whole concept of asset of protection comes to the rescue.

With some asset protection strategies in place, you’ll have an opportunity to fill in any holes left by your insurance policies. Just make sure you read every page of your policy agreement so you’ll know which of your assets needs protection from any risks. 

5. Assign Liquid Assets Correctly

Generally, having more liquid assets means a greater risk of losing them if they’re not protected. For example, if you have money deposited in your checking account which is considered a liquid asset, you’ll more likely lose the same to a creditor or a judgment holder.

Because of this, it’s best to use some asset protection strategies that can help you handle your liquid assets correctly. Instead of bringing more money in your checking account, putting up a home equity plan can be a good way of protecting your assets. It’s not easy to recover in a lawsuit and it helps you assign liquid assets correctly.

Source: Surprenant & Beneski, PC

The Bottom Line

With the information mentioned above, asset protection can indeed provide benefits to your family’s financial future. However, it’s essential to note that it’s not simple and you need to take adequate steps to safeguard your assets from lawsuits and other situations in the long run.

Besides, what’s the point of putting up your wealth if you let other people take it away from you. By now, you should have already realized the importance of asset protection in your life and that of your family.

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