How often do you think about protecting your assets? Essentially, everybody needs to protect their assets against lawsuits and other eventualities. While you may think that corporate managers, entrepreneurs, and other litigation-prone individuals are the only ones who need to protect their assets, there are many events in which yours can be taken away from you. Filing a divorce, for instance, is one of those events. Unfortunately, most people don't consider these eventualities until they occur.
Asset protection refers to any method to protect your assets from any legal threat. The first and most important step in asset protection is to analyze all assets that need protection, and, then, determine which strategies would work best to protect them. Effective planning ensures you don't lose your assets in case of any untoward incident.
One of the aims of asset protection is to prevent or reduce risk by protecting your assets from the claims of lenders and creditors. This may involve legal strategies to prevent the seizure of your assets. You can hire firms like milehighestateplanning.com/nevis-llc, which have been offering asset protection services for many years, to help you in this area.
This article has all that you need to know about how you can protect your assets. Read on to get a hold of them.
1. Leverage Protected Entities
When you're keeping both personal and business assets in one account, you'll be exposing your personal assets to danger. Your lenders might come after your assets, and lawsuits may also threaten them. For instance, you can be personally liable for your business's debts if you mix personal and business transactions.
The first step you need to take is to separate your personal bank account from the business account, and ensure you got a different credit card for business transactions. The second step is to take a corporate veil, such that you change your company from an unlimited sole trader company to a limited company structure. This will help prevent creditors or any other person you’re indebted to from taking away your personal assets.
2. Consider An Umbrella Insurance
There are different types of insurance, but umbrella insurance covers policies you may have for both business and personal purposes. It protects both your existing and future assets against lawsuits, thus ensuring your assets remain intact. Insurance will be there for you if something unexpected happens to your assets.
3. Use Asset Protection Trust
Utilizing trust is a perfect way to protect family and business assets. In this arrangement, your assets are transferred to the name of a trustee, and nobody can claim them. One advantage of protecting your assets through trust is control. A trust will allow you to name your beneficiaries, and they'll give you conditions on how and when your assets will be transferred to the beneficiaries.
4. Have Proper Contracts And Follow The Right Procedures
When it comes to asset acquisition, there must be an underlying agreement in place. Contracts can act as evidence of asset acquisition and help keep your assets protected. So, ensure all the arrangements are well-made and are legally binding. A binding agreement will act as a shield when the time comes, and you find yourself in the courtroom to defend your assets.
5. Transfer The Asset Rights
Creditors and other lenders can't claim assets that you no longer own. To get rid of assets, transfer them to irrecoverable places from which you may be able to generate revenue using them, or you can transfer the assets to a family member as a gift. If you're at a high risk of losing your assets, you can consider transferring them to your heirs early enough before the claimant knocks on your door.
You can also transfer the assets to your spouse's name. Check to see whether your spouse is in a less risky profession before you can transfer the assets to their name. Creditors and lenders will have no right to claim assets that are under your spouse's name.
6. Establish A Holding Company
This is another effective strategy for protecting your business's assets. It involves keeping multiple entities separately. Essentially, establishing a holding company entails splitting property and assets, and putting them in different limited liability entities. One advantage of this strategy is that even if you encounter a financial loss in one entity of your business, there'll be a limited impact on your assets.
You can decide to have an operating entity and a holding entity at the same time. The operating entity can possess the assets, while the ownership remains with the holding entity. This separation of entities protects your assets and allows your business to continue in operation even when faced with a financial crisis.
7. Have A Lawyer In Place
Working with a lawyer can help protect your personal and business assets. It would help if you consider working with a lawyer even before you venture into your business. The lawyer should help you iron out legal challenges that might affect your business in the future.
The lawyer can also advise you on the type of business you can open—sole proprietorship, partnership, or a limited company. They’ll help you understand the advantages and disadvantages of each type in relation to asset protection. The lawyer will also guide you to ensure you follow the right procedure in signing contracts. Most people who venture into sole proprietorship businesses, for instance, can be more vulnerable to legal conflicts and can end up losing their personal assets than those in partnerships and limited companies.
8. Use A Debt Strategy
This is a strategy mostly used by investors to protect their assets. It discourages creditors and vendors from claiming your assets. By purchasing your assets by taking loans, you’re making your equity unidentifiable. Also, taking loans to buy your assets decreases the amount of tax payable to the government. The amount you save on tax can be reinvested to expand your business.
When it comes to protecting your assets, it's better if you can take the necessary steps early enough before you're faced with lawsuits. Having effective strategies in place will ensure all your assets, both personal and business, are safe from future threats. Following the above tips and taking the necessary actions will protect your assets from the danger of lawsuits.