As you learn to manage your money effectively, you will likely start to accumulate more assets. The process of accumulating assets may take you many years of hard work. But unfortunately, these hard-earned assets can be left vulnerable without asset protection planning.
That’s right! Beyond taking action to build your wealth, you should take the time to investigate asset protection planning. Here’s everything you need to know as you dive into this area of wealth management and financial planning.
What is asset protection planning?
The goal of asset protection planning is to keep your property safe in the event of a lawsuit. Although you may not think that you are likely to be sued, it is much more common than you might think. According to the U.S. Financial Education Foundation, over 40 million lawsuits are filed every year. With so many lawsuits filed annually, it is not out of the realm of possibility for you to be sued.
A lawsuit could be the result of anything ranging from a car accident to a bankruptcy. Whatever the reason a lawsuit enters your life, proactive asset planning could safeguard your assets.
With so much on the line, it is not surprising that many financial professionals recommend starting the process as soon as possible.
What are the benefits of asset protection planning?
When you choose to implement smart asset protection planning, there are many benefits. Throughout the process, a restructuring of your assets can limit your risk of losing the asset due to circumstances beyond your control.
The goal of restructuring the ownership of your assets is to create a degree of legal separation between yourself and your assets. With this legal distinction, you can legally protect your assets from creditors without lying about your asset ownership interests. As you work through an asset protection plan, seek out opportunities to shelter your assets.
Should you start asset protection planning?
Asset protection planning should be an important part of your financial planning strategy. If you have substantial assets, you should start the process now.
The downside to this option is that it will be too late if you are already entangled in a lawsuit. With that, it is a good idea to be proactive about this important financial tool. Take action to start the process as soon as possible.
Who does asset protection planning benefit the most?
In many cases, you should start asset protection planning immediately. However, it is especially important for certain individuals. These include:
- Professionals that work in fields with a high risk of liability. For example, doctors, lawyers, and landlords.
- Anyone with a significant amount of wealth.
- Homeowners with an outstanding mortgage balance higher than the current value of their home.
- Anyone with extension credit card debt.
- Anyone concerned about potential lawsuits in the future.
Although an appropriate plan is valuable to most, the people mentioned above will find an asset protection plan especially useful.
Not sure that you need to embark on this journey? Take some time to consider your long-term wealth plans. If you are planning to accumulate wealth, then it is worthwhile to consider your asset protection options along the way.
How to protect your assets
Are you convinced that you should pursue asset protection planning? Here’s what you need to do to get started.
Examine your financial goals
The first step to building an effective protection plan is to consider your financial goals. Without a clear vision of your money goals, it can be difficult to know where to focus your efforts.
For example, you might not want to take any big risks with a particular asset. Let’s say you have a very profitable business that’s the bread and butter of your income. You may want to focus your protection plans around this particular asset.
Consider your current net worth and what you want to protect. Once you have an idea of what risks you want to minimize, then you can move forward.
Consider your estate planning goals
Estate planning will tie together nicely with your asset protection planning. An estate plan is a system you put in place to protect your dependents when you are no longer able to.
Although estate planning can be a slightly depressing thought, it is critical to set up a plan that you are comfortable with. If you don’t put a plan in place, then you might leave your family in an uncomfortable position when you’ve passed away.
Don’t delay estate planning until ‘another day.’ Although it can be tempting to skip this key piece of your financial puzzle while you are young, you’ll likely feel better once you set everything up for your dependants.
Want to dive into estate planning? Here’s a checklist to help you wade through the process.
Talk to an attorney
A competent attorney is an important part of creating a comprehensive asset protection plan. At first glance, all attorneys may seem pretty similar. After all, they all work with the law. However, you should do extensive research before hiring an attorney to guide you through the process.
As you consider your options, you can start looking for an attorney that is well versed in estate planning and asset protection. Unfortunately, an effective asset protection plan can be somewhat complicated. Although the theory is relatively simple to understand, the jargon-heavy legal world can make everything more tricky.
Take some time to explore the attorney options in your area. When you find a competent attorney that is pleasant to work with, discuss your financial goals. With those in mind, a practiced attorney should be able to guide you through the legal steps you will need to take to protect your financial future.
The bottom line
A financial plan is a great place to start your journey. But as you build more wealth, you should take steps to protect the assets you are creating. Asset protection planning is important so don’t skip this key part of securing your financial future. After all, you wouldn’t drive around without car insurance. So why take a big risk on your financial future?