By Teresa Kuhn, JD, RFC, CSA
President, Living Wealthy Financial
There is an understandable tendency for many people to believe that “asset protection” is a financial strategy benefitting only multi-millionaires or those in professions vulnerable to lawsuits, such as doctors, dentists, lawyers, engineers, and consultants.
This belief may explain why so many Americans have done little or nothing to protect their wealth from potentially devastating occurrences such as lawsuits, health crises, divorce, failed business ventures, and personal bankruptcy, among others.
Hard-earned wealth can quickly evaporate as a result of any of the events I mentioned above and others that no one could ever anticipate. Modern asset protection techniques exist to shield you from these possibilities and provide some extra peace of mind and a greater measure of control.
Using these strategies in a blueprint designed by a qualified planner can help protect your children or other heirs and safeguard against adverse consequences. A well-thought-out plan will ensure that your final wishes are carried out and lessen the possibility of family squabbles and tension.
Asset protection planning is needed not only by the super-rich but also by those of moderate wealth; people who own anything of substantial value, such as land, a commercial building, home, intellectual property and patents, or equipment and vehicles.
If you own or have inherited any of these kinds of things and you want to do everything possible to ensure that you will be able to pass them on to your heirs, and not the courts and lawyers, I recommend you start putting together a strategic asset protection plan that is done well before it is ever needed.
Here are some components I feel should be in every asset protection plan. This is by no means an exhaustive list, and I highly recommend seeking the services of an asset protection specialist. But I am hoping that this will help you start the process.
- Your will. Most people with whom I speak seem to understand that a will is a critical component of an asset protection plan. Yet, amazingly, nearly 60% of Americans do not have a will, even though as far as legal documents go, it is usually inexpensive and easy to have prepared. Bear in mind that a will is only part of an estate planning solution. Dying without a will (“intestate”) is never a good idea. On the other hand, just because you have one doesn’t mean the job of asset protection is done. If you haven’t drawn up a will yet, or your current will hasn’t been updated in a number of years, contact me and I will help you find resources to get your will done.
- Durable power of attorney. In some ways this could be even more critical than a will. A durable power of attorney allows you to appoint a trusted friend or relative to be your agent to handle specific duties and decisions should you become incapacitated. This document is crucial to a sound asset protection plan because if you were to become incompetent or otherwise incapacitated without it, your loved ones would be prevented from making many important health and financial decisions on your behalf. When this occurs, loved ones who need to make those decisions are forced to go to court and seek appointment as a guardian, a process that can be time-consuming and costly.
- Property Insurance Good property insurance, such as homeowners’ insurance, umbrella policies, business insurance, professional liability, and even auto insurance with more than the minimum amounts of liability, can be valuable in keeping your wealth safe. The goal here is to have enough insurance so that anyone who sues you will be willing to settle with your insurance company and not go after your home or other assets.
- Life insurance Depending on the state in which you live, a creditor may not be able to claim either the cash value of a life insurance policy or the death benefit. In some states this is also true of annuities. This makes specially designed permanent life policies, such as those I use for my Bank on Yourself clients, a natural choice for inclusion into an asset protection plan. Again, you must consult an asset protection specialist who is an expert on the creditor protection limits in your state to see how much protection life insurance will actually afford you.
- Trusts Many people associate trusts with tax havens for the rich and famous, but the fact is a trust can benefit anyone who owns anything of value that needs protecting. There are nearly as many kinds of trusts as there are people who need them. I don’t have time to go into them in any detail here except to say that a trust designed by an expert in asset protection can be your most valuable tool to ensure that your final wishes are carried out and your family gets access to your assets
Obviously, I’ve only scratched the surface when it comes to asset protection planning. The important thing is to get you thinking about what you need to do right now to keep your wealth safe and intact for future generations. I would love to discuss asset protection and other financial issues with and provide you with valuable resources. Schedule a consultation today by calling our office at (800) 382-0830 .
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