Asset protection strategies are the measures you take to shield your wealth from potential lawsuits, creditor actions, or unforeseen personal challenges. When executed properly, these strategies are legally sound and can be highly beneficial to anyone with wealth they wish to preserve.
Many asset protection strategies involve forming entities to divide assets so that your wealth is not consolidated under a single individual. Examples include forming an LLC or partnership to control investments and business assets, as well as creating a trust. Asset protection strategies also encompass precautions taken to protect your assets from unexpected events, such as homeowner’s insurance, long-term care insurance, and professional insurance for certain high-risk jobs.
Benefits of Asset Protection
There are many ways to protect your wealth, and the ideal asset protection strategy for you will depend on your unique portfolio contents and financial situation. The guidance of an experienced financial professional is extremely valuable when forming a plan to protect your assets. But in most cases, an effective asset protection plan should present the following benefits.
Discourage Frivolous Lawsuits
Sometimes, having significant wealth can make you a more attractive target for lawsuits. If your assets are secured, it may dissuade other people from asserting legal claims against you with financial motivations. Litigation can be quite costly, and avoiding lawsuits is often the most financially viable course of action.
Financial Privacy
Successful asset protection strategies can often shield you from public inquiries that would identify you as the owner of significant wealth. For example, if you create a trust, you assign a trustee to administer the assets you’ve set aside. Asset protection can also help you to lower your visible net worth to discourage nefarious actions, such as identity theft or unfounded lawsuits.
Business Continuity
If you’re a business owner, asset protection strategies can help you ensure that your company continues to run smoothly when you’re no longer at the helm. If your company assets are not insulated legally, they may be more vulnerable to lawsuits and creditors. Furthermore, a solid asset protection strategy should include a succession plan that places your business in capable hands. Taking these steps early in the life of your business can help it persist for generations.
Why You Should Care About Asset Protection
There is a common misconception that asset protection is only a tool used by high-net-worth individuals. However, families and individuals at all stages of their financial journeys can benefit from smart financial planning with a focus on asset protection. Whether it’s a lawsuit or a natural disaster, asset protection can help you protect your wealth during the unexpected challenges life throws your way.