One of your obligations as a business owner is to ensure that you have a solid and effective asset protection system in place. Remember that asset protection planning should begin far before any risks become imminent. Here's how to prepare ahead of time to minimize, if not eliminate, the danger of exposing your assets to litigation and other risks.
1. Don't Wait Until It's Too Late
Many people do not consider asset protection until a legal claim is filed against them. Although there are ways to safeguard your assets after you've been served, the courts typically favour individuals who have planned ahead of time for asset protection. As a result, our first piece of advice is to start immediately, including establishing the proper tax structures as soon as you start a firm. This will also save you money in the long term on government fees and set-up costs.
2. Use Trusts
Using trusts is one of the most helpful asset protection techniques since the person does not legally own the assets—the trust owns the assets—and thus, the asset is not theirs to lose if they are sued. The individual controls the trust, but they do not own the assets included in it. The use of trusts to protect assets traces as far back as ancient Rome.
3. Opt for the Best Insurance Policies
Property insurance, liability insurance, and even an umbrella policy are all must-haves for any business owner. Property insurance protects your company's assets. Check whether your property insurance policy covers your inventory or not. If it does not, choose a separate policy for your stock items sale. Personal injury and property damage are covered by liability insurance.
Consider an umbrella policy for hazards and dangers that are beyond the scope of your property insurance. If you have all these in place and functioning for you, you can be confident that crises or other unforeseen events will not disrupt your cash flow.
4. Move Assets to Family Members
If one spouse is more likely to be sued in their employment than the other, it might be wise to put assets in the name of the spouse who is less likely to be sued. In general, creditors of the at-risk spouse will be unable to seize assets in the other spouse's name.
5. Contribute to Your Super
Another asset protection strategy is to pay concessional and non-concessional contributions to a regulated superannuation fund. Maximizing concessional contributions can reduce your assets' exposure to creditors' claims while increasing your tax advantages.
If you have a self-managed super fund (SMSF), make sure it has a corporate trustee rather than individual trustees.
6. Hire Asset Protection Experts
Setting up asset protection trusts and structures can be challenging, especially if you have no past expertise. Consider seeking the counsel of an asset protection specialist to ensure you are protected against unanticipated situations. This will assist you in determining the optimum tax structure for your assets and how to organize them.
Implementing effective asset protection methods should be high on your priorities list as a business owner and investor. You risk losing your hard-earned assets to creditors in a catastrophic event. While this article offers valuable asset protection advice, there is no one-size-fits-all approach to protecting your assets.
Have a financial adviser in Queensland draft up an asset protection strategy that fits your unique needs today! Here at Swell Financial Planning, we'd love any opportunity to use our expertise in making sure your precious assets don't go down the drain. Get in touch with us today for a better tomorrow!