Asset Protection: Practical Financial Self-Defense
You’ve worked hard to get to where you are today. You have labored, budgeted, saved, invested, and taken financial risks to build your net worth. It took time and effort to get to this point in your life. Now it’s time to take steps to protect what you’ve worked so hard to build. An asset protection plan can help ensure that your hard-earned stays where it belongs – in your pockets!
Asset Protection Planning involves looking ahead to see what threats might interrupt your future plans and take away money that you have worked hard to earn. In today’s world of increasing uncertainty and endless litigation it makes a lot of sense to create a plan to safeguard your assets from people who could legally take it from you.
Who could legally take your money away from you?
Sources Of Risk
In any given day you could potentially be involved in some sort of “financial accident” that you do not anticipate. Some obvious examples of that would include being involved in a serious car accident and not having adequate insurance, an unexpected illness, being downsized in a bad economy, or an expensive divorce.
Increasing Personal Injury LawsuitsIn today’s society it is becoming more common for people to end up in lawsuits over seemingly innocent things.
Here are just a few examples that you may haven’t considered before:
- Leaving a scathing Yelp review for a business that provided poor service to you
- Making false accusations against people on Facebook or other social media platforms
- Sharing copyrighted content online (yes, even videos of your child’s dance recital)
- Making a statement at work that a coworker finds offensive
- Making a disparaging statement about a coworker that later gets him or her in trouble
While it is easy to find yourself involved in these kinds of personal injury disputes, it is not easy to get out of them. In a study of personal injury claims, www.lawyers.com reported that the claims filed ranged from $3,000 to $75,000. Defendants settled in 70% of those cases and the average settlement was $52,900. That’s not pocket change for anyone! Personal injury attorneys absolutely love these kinds of lawsuits because they know they can scare you into settling and they get a large commission for taking your money.
Have you ever noticed that the personal injury attorney firms that frequently advertise on TV use logos of predatory animals like lions, tigers, and wolves? It’s not by accident. They are out for blood – YOURS!
So what can you do to protect yourself from these kinds of legal claims? Aside from never making any mistakes that lead to lawsuits, here are some strategies to help shield your assets from being “legally” taken from you.
Why A Multi-Layered Defense System Is Necessary
Just as you would typically find a castle that has a moat, a drawbridge with an iron gate, and turrets for defense against an attack
you need to have multiple ways of deterring people from taking your money. The more difficult you make it for people to take your money, the less likely they will be successful in their attempts.
LAYER 1: Maintain HIGH insurance limits on your home and auto policies
Having the proper amount of insurance on your home and autos is always the #1 line of defense. Most people carry a little more than the minimum levels on their auto and home insurance to keep costs down. But when people cause an accident that involves multiple vehicles or an expensive vehicle, they find out the hard way that property and medical claims can far exceed their coverages. Don’t let that be you!
LAYER 2: Maintain an umbrella policy on your home
Umbrella policies are pretty inexpensive but they provide a great deal of extra coverage for situations that you wouldn’t normally think about.
LAYER 3: Contribute as much as your can to retirement plans
Build up as much wealth as you can in your employer’s 401(k) Plan or other retirement plan. If you ARE the employer then create a retirement plan for yourself and contribute regularly to it! The reason you need to do this is that employer sponsored retirement plans receive full creditor protection under the law – no matter what! This applies even to bankruptcy and criminal actions.
IRA balances are protected up to about $1.4 Million under federal law in the event of bankruptcy.
LAYER 4: Advanced Protection Techniques
Wealthy families are more frequent targets of lawsuits simply because people think they will be quick to settle any legal claim. These families have substantial wealth outside of retirement accounts that have automatic creditor protection. Advanced planning is needed to shelter these assets from potential lawsuits and creditors.
Sophisticated asset protection planning involves creating wealth protection entities such as Domestic Asset Protection Trusts, Family Limited Partnerships, and other legal entities that offer limited liability to the owners. If you are self-employed or have substantial real estate assets you should be especially concerned about liability resulting from business and rental activities.
ARE YOU READY TO CREATE YOUR ASSET PROTECTION PLAN?
Getting started is easy. The first step is to let us know how we can help you. Just fill out the simple contact form below and we will be in touch with you right away – or just call us at 480-699-5540.