Asset security and protection is a set of strategies you do to protect your wealth and assets.
If you run a business, it's likely that you're exposed to various risks from events you haven't anticipated including creditor claims, work-related accidents, lawsuits, insolvency, and more.
To protect your assets from such risks, it's recommended that you regularly review your assets and potential risks. More importantly, you should implement and update your asset protection strategies when needed:
Strategies That Can Help You Protect Your Assets
Get Appropriate Insurance Policies
It's good to have appropriate insurance coverage. It's even better to have insurance policies designed with asset protection in mind. For example, you can use "directed trusts" to set aside certain assets for the benefit of your children or grandchildren.
A "directed trust" is a type of trust with provisions to limit its exposure to creditors, and ensure that the beneficiaries of the trust receive their share regardless of whether you're alive or not.
If you want to set aside certain assets for yourself (for future use), such strategies can help to protect such assets so that the beneficiary(ies) of such assets receive the assets even in the event of your death or inability to use the money.
Another insurance policy that can help you protect your assets is the "assignment of benefits." This is a type of insurance policy that lets you assign the benefits from your policy to third parties so that they receive the payments if something happens to you.
Restructure Business and Asset Ownership
You can structure your business to reduce creditor claims against your personal assets. Also, you can restructure the ownership of your assets to further reduce the risk of exposure to your personal assets.
For example, if you own a business, you can structure it in a way that it becomes a subsidiary of a larger corporation. You can divide your assets or fund them into separate corporate entities, or offshore ones.
Work on Succession and Estate Planning
Succession planning is critical for effective asset protection. You can structure so that the transfer of ownership can only take place in the event of your incapacity or death. You can also name someone to take over your business in case something happens to you.
Estate planning helps you to protect not only your tangible assets but also your intangible ones. For example, you can use a "living trust" to set aside money and other assets for your children's use.
A living trust is also a way to protect you from creditors as it can minimize your creditor's claims to your assets.
Other Things You Need to Consider
You also need to keep an eye on your business. This is because you need to be aware of the risks that are inherent in the business and what can lead to the risks. For example, you should understand the risks that are associated with the nature of your business.
You should also understand the risks that are associated with the manner of organization of your business. For example, if your business involves handling large amounts of cash, you will want to take precautions in terms of security.
Asset security and protection is critical. If you are using a business structure for your business, you also need to consider asset protection in that context.
Otherwise, you can focus on asset protection strategies outside of your business. Property, and other tangible and intangible assets, can be protected by appropriate insurance policies and estate planning.
If you want to learn more about asset protection planning, Swell Financial Planning is here to help you. We offer asset protection planning services among others. Contact us today to know how we can help you!