Everyone has heard a horror story about a business owner that lost everything in an unfair lawsuit, but the fact is, they probably never thought about protecting their assets. If you are worried about what might happen to your wealth and assets in the event of bankruptcy, then have a read through these tips to find a way to protect your assets and secure your family’s future.
Why Is Asset Protection Important?
Asset protection is the act of safeguarding your property against creditors and plaintiffs, and it ensures that your wealth is secure before someone tries to sue you and take your assets away. Once the legal decision has been made and the creditors appear at your door, it is too late to save your assets, and the court is not usually forgiving when it comes to last minute transfers. If you don’t already have asset protection, you won’t be able to do anything to stop your assets being seized. So, by being prepared and creating a plan with a knowledgeable financial partner, you are protecting your wealth from any damaging legal action in the future.
6 Tips for Protecting Your Assets
1.) Create a Family Trust
A family trust is one of the most popular options for protecting your assets. Family trusts are a type of discretionary trust that is created by someone who wants to support beneficiaries – other family members – and manage assets. It holds assets for an entire family, and is useful for handing them on to future generations. This trust is ideal for protecting assets because only the trustee is responsible, and you can choose someone who is unlikely to go bankrupt.
2.) Follow Proper Procedures
An excellent way to avoid running into trouble in the future is to make sure everything is legitimate now. It is a lot easier for creditors to catch you out if you act fraudulently or if you don’t follow all the procedures to the letter. If you want to protect your assets, you must check that you have solid lease agreements for rentals, only hire licensed, insured professionals, and don’t hire people to work under the table. If you follow all the rules carefully, and have strict contracts for every instance, you should be much safer.
3.) Get Insurance
A simple solution to protect your assets and wealth is to get insurance. The right insurance policy will cover your future income, and also covers you for any future outstanding debts on your assets. There are several types of insurance that are suitable for asset protection, such as life insurance, trauma insurance, income protection, and total and permanent disablement insurance.
4.) Don’t Show off your Wealth
Be smart, and don’t flaunt your wealth to the world. It may feel nice to have your coworkers or neighbours admiring your house, car and other luxurious items – but it makes you vulnerable. If it is obvious how much money you have, people will know you are a good target. You will be inviting someone to sue you, and lawyers will be more than happy to join in.
5.) Put Assets in Low-Risk Name
If you are the high-risk spouse, or member of the family – meaning you are the one who is most likely to be sued for undertaking risky commercial or professional activities – then it would be smart to put your assets in someone else’s name. This low-risk person could be your spouse, or another member of the family that is not engaging in these activities and would be safe from being sued. Therefore if you go bankrupt the majority of your wealth is safe.
6.) Set Up a Company
Instead of being a sole trader or having a partnership, choose to create a company. This will protect your personal assets from being seized in the event of bankruptcy. Your company will be a separate legal entity, and if you use a different bank account and only use the company name on company documents you will be much safer.
The Benefits of an Asset Protection Lawyer
If you are worried about protecting your assets, then the best thing to do is talk to an asset protection lawyer. An expert from a reliable law firm will help you create the right strategy for your specific assets, and will ensure you have chosen the most secure, safe option.
This article is not a substitute for professional legal advice, always contact a qualified lawyer to learn about your asset protection options.