Protect Your Assets
Protecting your assets is one of the most important parts of managing your finances. Since late planning can backfire or make matters worse, it is much easier to be proactive and protect yourself against potential liabilities than to do damage control afterward. Creating an asset protection plan is a terrific way to protect yourself from claims or liabilities before a claim arises.
Forbes.com1 says those who worry the most about asset protection are those who are the most likely to get sued; think obstetricians and, more recently, real estate investors here. But average folks often get caught up in difficult situations as well, so if you have something to protect then the topic of asset protection should be on your mind.
It is a common misconception that asset protection planning is a substitute for insurance however, it should be considered as supplemental insurance instead. If you find yourself in a legal situation your insurance company can help pay to defend or settle your case, where on the other hand, your asset protection plan will not cover legal fees or defend a lawsuit.
Your business entity such as corporations, partnerships, and LLCs are meant to be the catalyst for operations, not to be used as a personal ATM. Personal assets belong in a trust, and you can put yourself at lower risk of liability by placing your personal assets into a business entity. Placing your assets into a trust will provide protection for both yourself personally and for your business.
Keep your plan simple. It should be a red flag if you have a hard time understanding how your assets are being held or transferred. Work with your CPA to create a clear plan for protecting your assets. Remember that questions are common and expected, but you should walk away with the confidence that you have a solid strategy outlined and most importantly are proactively protecting yourself from risk.