No one wants to think about getting sued or going bankrupt, but the fact is that these things can happen.
If you don’t have any asset protection in place, your assets could be seized by creditors, leaving you with nothing.
Asset protection can help safeguard your assets and ensure that you have something left to fall back on if a lawsuit or bankruptcy does happen.
Whether acquiring asset protection in the event of a personal injury, home foreclosure, car accident, or any other situation, there are many important steps to take.
You must know what types of asset protection plans are available and how much protection you need before choosing the right plan for you.
This article will outline some ideas that might help in determining what type of asset protection to get and how to get started. If you prefer more hands-on guidance, you should consult an estate planning lawyer about your options.
Asset Protection for Personal Needs
Protecting your personal assets is important if you are involved in any lawsuits or have debts that you cannot pay.
This includes protecting things like your house, car, furniture, and savings. Each plan offers a slightly different level of protection and may be better for certain situations than others. Here’s how they differ:
Wills are designed to protect your assets when you die. You can set up an irrevocable trust to avoid probate and provide asset protection.
Establishing an irrevocable trust gives you complete control over who will inherit your assets, and you can specify whether they are included in the estate for taxes.
A revocable trust is a great place to start with estate planning, but an irrevocable trust offers additional benefits in asset protection.
Making gifts to the trust is not considered taxable because it is not treated as income to you. Setting up a trust can also diminish your liability, so family members are more likely to be protected from lawsuits if you have a trust in place.
Getting additional life insurance is one of the most common ways to protect your family from financial hardships after your death.
Although life insurance is generally not taxed, if you are sued, it can be considered an asset for which you are financially responsible.
A personal umbrella policy, which can protect your assets when you are sued for any reason, is an excellent option to consider when looking at life insurance.
Asset Protection for Businesses
When setting up your business, it’s important to look at the different types of asset protection plans available.
Having an asset protection plan will allow you to maintain your business even if an unforeseen event or lawsuit arises. Here’s how they differ:
Business Protection Plans
LLC, S Corp, or Corp are the most common ways to establish your business, but each comes with varying levels of protection. If you would like to protect your personal assets in the event of a lawsuit or bankruptcy, it is recommended that you consider incorporating them.
This means you will be more likely to have personal protection from any debt or lawsuits that may arise.
However, if you own a corporation or an LLC, other plans can provide asset protection as well as complete control over your business.
Partnership Protection Plans
A partnership plan works by specifying how partners are paid, what happens if one partner wants to leave and how remaining businesses will be managed. Just as with a business, you can set up an LLC or Corp plan for your partnership.
Of course, this will vary depending on what type of assets you have and how much protection you think you may need.
This is because having an asset protection plan in place is a prudent way to look out for future liabilities and the safety of your business.
How to choose the right asset protection plan for you?
The right asset protection plan for you will depend on your unique situation and what you need to protect. Determining the best option starts with knowing what types of asset protection are available and how much you need to protect.
For example, an LLC is a good place to start if you are serious about protecting your personal assets.
However, for complete control over your business, you may want to consider a partnership plan or corporation. This way, you can decide who manages the company and protect it from any lawsuits.
It is important to safeguard your personal and business assets. The right plan for you will depend on what you want to be protected, how much protection you think you need, and the type of asset that needs safeguarding.
Hopefully, this will help you decide which type of asset protection plan would be best suited for your situation.