Did you know 60 percent of Americans don’t have a will set up? Avoid losing your valuable assets by taking the proper steps. If you want to learn about asset protection planning, we can help.
This wealth management guide will explain why you should create an asset protection plan. Otherwise, you could lose your assets to lawsuits.
Want to learn more? Keep reading for financial planning tips.
Asset Protection Planning Defined
Asset protection planning will protect your property in the event of a lawsuit. You might not think you’ll ever get sued, but it’s pretty standard. 40 million lawsuits get filed each year.
Lawsuits could result from bankruptcy or a car accident. Protective asset planning is essential to protect your assets. Financial professionals recommend you begin the process right away.
Who Should Begin Asset Protection Planning?
Asset protection planning is essential for any financial planning strategy.
Some people make the mistake of starting too late when they have already become tangled in a lawsuit. You should be proactive about asset protection.
Are you a professional and work in an area with a higher risk of liability? Landlords, lawyers, and doctors should seek asset protection.
People with a significant amount of wealth benefit from asset protection planning. A homeowner with a large mortgage balance that’s higher than the value of their home should make a plan.
Some people look into the planning if they feel concerned about potential lawsuits.
What Are Your Financial Goals?
To build an effective plan, think about your financial goals. You want to create a clear goal of your finances, so you understand where to focus your efforts.
Don’t take significant risks with a particular asset. If your profitable business is your primary income, focus your plans around this asset.
What is your net worth, and what do you want to protect? Once you understand the risks to minimize, start moving forward.
What About Estate Planning?
Estate planning coincides with asset protection planning. An estate plan will protect your dependents when you can’t.
Estate planning is a critical plan to set up. Otherwise, you could leave your family in a bad position when you pass.
Work With an Attorney
A reputable attorney will help you set up an excellent asset protection plan. Attorneys might seem similar, but they tend to have a specialty.
Find someone who has experience with creating asset protection plans. An asset protection attorney will guide you through the steps.
Protecting Your Family
A way to protect your assets is by getting a family-limited partnership (FLP).
If there are family-owned properties or businesses, you should set up an FLP. This way, your children will get to own these family-owned assets.
Creating an FLP often involves creating a partnership. As the general partner, you will make significant decisions. Then, you will make your family members and heirs limited partners.
Your partners will have a stake in the partnership. They might own a part of the assets. The size of your estate will be smaller.
What About Tenancy by the Entirety?
You can also achieve asset protection with tenancy by the entirety (TBE). This is joint legal ownership between two married people.
It’s offered in certain states. It provides particular estate benefits to people who hold their property in TBE.
Tenancy by the entirely will simplify the inheritance process. It also ensures shared ownership of a property and maintains survivorship benefits.
TBE will provide some financial protection. It safeguards property from litigation and certain creditors.
Both owners in a TBE will hold equal shares of the property, no matter the origin of the funds. The property cannot get transferred or sold without the spouse’s consent.
Debt claims against an estate will get applied to a TBE property if the debts are shared. Individually owned debts won’t get claimed against the property.
If one spouse gets sued or files for bankruptcy, the TBE-held property won’t get touched.
Have You Considered an Asset Protection Trust?
An asset protection trust (APT) is a self-settled trust. It will protect assets from lawsuits and creditor actions. The legal structures are international or domestic. Not all US states will recognize them.
International APTs will cost more than their domestic counterparts. Yet, they provide strong protection. They will place assets out of the reach of American courts and laws.
You’ll Need to Meet Annual Requirements
If your business is an asset, keep your business’s registration up-to-date. Hold annual meetings and keep your business funds separate from your own. Avoid signing business-related documents in your name.
Maintain the separation between your assets and your business. You will remain protected from disasters or debts incurred by your company.
Protecting Your Business Assets
As a business owner, protect your business from yourself. A limited liability company (LLC) will help protect main assets. If you have rental property, hold assets in an LLC or a limited partnership.
This will protect you from personal liability if something happens on the property. An LLC will protect you because a tenant can’t sue you directly.
Business assets will remain at risk of a lawsuit if the tenant decides to sue you. If you have the right insurance, you can protect yourself and your assets.
Create an Asset Protection Plan
We hope this guide on an asset protection plan was helpful. Do you own property, a business, or have a significant amount of wealth? You should pursue an asset protection plan right away.
Do you need more practical tips like this article? Check out our other business guides on the blog.