Do You Need an Asset Protection Plan?

CastleThink about all of the things that you own, from every dollar sitting in your retirement account, to the home you just bought, or the business that you’ve slowly grown into a successful enterprise over the last ten years. Now, think about how much time, effort, blood, and sweat went into earning the money in that retirement account, saving up for your home’s down payment, and getting your business off the ground.

All of the things you own that hold value are your assets and make up your estate. Unfortunately, those assets may be at risk. What happens if one of your employees gets into a bad car accident while driving your company vehicle, or a child climbs a tree in your yard and falls? What if you face big medical expenses and your creditors try to go after your business?

We live in an increasingly complex and litigious world, and we can’t predict what is going to happen tomorrow. In the past, it might have been enough to buy a few insurance policies to try to protect yourself from risk, but these days, many high-net-worth individuals and even middle-class Americans are actively working with attorneys to develop personalized asset protection plans. Is an asset protection plan right for you?

Who Needs an Asset Protection Plan?

An asset protection attorney would argue that anyone with assets they want to protect is a candidate for an asset protection plan. However, high-net-worth individuals, business owners, licensed professionals, and entrepreneurs tend to face higher-than-average risks and have more assets to protect. (Did you just gain newfound wealth? Learn what to do with your financial windfall.)

What Does an Asset Protection Plan Entail?

If “asset protection plan” sounds nebulous, that’s because it is. An asset protection plan can basically be any strategy meant to shield your assets from seizure by creditors. Asset protection attorneys have many tools in their tool belts to accomplish this, and the details of your asset protection plan will depend on your estate, your particular risks, your budget, and your goals. A large-scale asset protection plan could include:

  • A variety of insurance policies
  • The creation of multiple business structures (usually limited liability corporations or partnerships)
  • Creation of asset protection trusts, including offshore protection trusts

Each one of these strategies can become incredibly complex and expensive, and many “tricks of the trade” that attorneys regularly use, such as devising offshore trusts filled with limited liability corporations, are really only relevant for high-net-worth individuals. However, that doesn’t mean that you should completely ignore asset protection for your personal assets and business assets.

If you don’t want to face the prospect of losing everything you’ve worked so hard to build, then you should at least consider looking into some basic insurance policies and consider incorporating your business so that your professional and personal liabilities are separate. It might be a good idea to reach out to an attorney in your area to see what common sense and affordable asset protection steps you should take as part of your overall estate plan.

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