- Personal Finance
Do I Need Asset Protection?
Do I Need Asset Protection?
Yes. Everyone should have some level of asset protection, but that doesn’t mean everyone should rush out to see an attorney, nor does it make sense for some people to spend hundreds, or thousands, of dollars setting up an asset protection plan that is overly complex. This article outlines some reasons why you should look into asset protection for yourself and your family.
Are You A Professional?
If you’re in a profession where you buy malpractice or liability insurance, you should consider using asset protection to work with your insurance plan. Why? Because asset protection helps limit lawsuits and protects you after your insurance policy has exceeded its limit. Say you screw up one day. You probably feel awful, but then you get served with a lawsuit. How much will they take?
If the claimant’s attorney sees you have a $200,000 insurance policy and you have $200,000 worth of exposed assets, you can bet he will be gunning for $400,000, and he’s going to try really hard for it too because that’s a significantly higher payday for him as well as the client. Now, imagine you have a $200,000 policy and $15,000 worth of exposed assets. The attorney should try just as hard, but do you think he will? Or will he be willing to settle for $200,000 before going to court? That lessens the cost and pain of trial, and also lessens the chance you’ll owe beyond your policy because he knows how hard it is to collect from someone who can’t pay.
Finally, imagine you have a $200,000 policy and $15,000 in exposed assets. What happens if the claimant does get a judgment against you for $400,000? That claimant would get the $200,000 insurance policy and have 10 years to collect the remainder from you. This is the part about asset protection that other attorneys don’t bring up. It would be a huge pain to have someone garnishing your wages or trust income for 10 years, but the fact of the matter is, he may only collect for that long, or until you file for bankruptcy. Neither is an optimal solution to the problem, but we can both agree that it is far better than losing all of the money you have saved up.
If you file for bankruptcy, chances are the judgment will be wiped away. If you did your asset protection properly, your assets will also be safe. This is why asset protection has duel advantages. It helps deter litigation by encouraging settlements and it protects you in the calamitous event you lose at trial.
Are You A Business Owner?
Your business is an asset, and it is one that can be taken from you in many circumstances. What claimants do not care about is leaving you your source of income. He or she wants a paycheck, no matter how it is obtained. Asset protection that protects your business is relatively easy, in most cases, so it is certainly something to make sure you do when you set up your business. If you have an attorney helping you, be sure to ask about it.
Do You Have Kids?
I bet you didn’t know you could be civilly liable for the actions of your kids? In some situations in many states, this is true. You don’t want to lose your house because your kid caused damage to someone else’s property. In North Carolina, you can also be liable for the damage caused by someone who was driving your car. That’s why even simple precautions can go a long way.
Are You A Cautious Person?
Some people just want extra protection for everything. These people buy the safest brands, take fewer risks and should look into at least the minimal asset protection. I’m one of these people when it comes to my hard earned money, so believe me when I say that it helps you sleep at night.
Are You About To Get Married?
Other asset protection attorneys advertise heavily to the wealthy, warning of spouses who take everything in the divorce. If feels a bit gaudy to me, but it’s true that asset protection can protect you from your spouse, but you, of course, have to do it correctly. Prenuptial agreements are the most common form of asset protection for the married type.
Do You Feel Like You’ve Earned What You Have?
I’m in the field of asset protection because I feel like when people make a mistake, they shouldn’t lose everything they’ve worked for over their entire life. Asset protection can never protect you if you’re intentionally attempting to defraud a creditor or a known claimant, so I have no issue with doing it correctly. Asset protection is also never a 100% total shield against creditors and lawsuits, so if you make a mistake, you’re still going to pay. I also greatly encourage people to pay what’s fair. What isn’t fair is when an attorney sees you have deep pockets, he goes after you harder and takes more just because you have built up some wealth.
Asset protection encourages settlements that benefit everyone except the attorneys, and it protects you in the worst case scenarios. There are varying levels of protection from the simple exemption planning to the more complex offshore asset protection trusts. You can decide which level is best for you, but in today’s litigious environment, you cannot afford to ignore your asset protection any longer.
Keep in mind that asset protection is also a part of good business, financial and estate planning, so when you’re getting those other things looked at, be sure to ask about asset protection. A good estate plan will include ways to ensure that unknown creditors can’t sneak in and prevent your heirs from receiving the assets you left for them. Annuities and lifetime trusts can be excellent asset protection tools that also help you prepare for retirement and living at an advanced age. And any good business start up looks heavily at liability, from both sides of the articles. You don’t want to lose your business to a personal creditor and you don’t want a business creditor to take your house.
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