Protecting business assets should be one of the foremost tasks of any business owner. Even if it seems that everything is going smoothly, the possibilities or something going wrong are endless.
To put it simply, if you have assets, you can always lose them. You may be doing everything right, but a little bad luck can turn into a disaster. Thinking ahead is one of the best qualities for a business owner. Exercise them.
These asset protection strategies shared by CS&P consultants can help you keep your assets safe while enjoying high profits and peace of mind.
1. Consider Asset Protection Trusts
Asset protection trusts can help you keep the assets safe by listing all your properties, business interests, and money along with the names of beneficiaries, who can receive these assets at a certain time. Trusts can be either revocable or non-revocable.
• Revocable trust – you get control over all assets. The trust protects heirs from a costly probate fight and offers a smooth transition to the trustees, in case of your incapacitation.
• Irrevocable trust – the 3rd party is needed to make changes. It has better asset protection features, allows saving on estate taxes, and qualifying for government assistance programs (for example, Medicaid).
Trusts can help you keep the assets safe from creditors, who illegitimately try to make claims over your property. Only the beneficiaries listed in the documents can get access to the stated assets and claim them at a set time.
Trusts may be costly, but they give you a good opportunity to keep all your assets safe.
2. Get Excellent Liability Insurance
When you are about to get high profits, the first line of defense from unexpected litigation is insurance. Consider speaking to your insurance broker to increase the liability limits. The personal umbrella liability coverage should be at least the same as your future net worth.
The liability insurance rates are usually inexpensive compared to what you can lose. A $5 million umbrella policy will cost you about $1,000.
3. Avoid Business Partnerships
All business partnerships put you at risk of losing your assets without making any mistakes. A lawsuit against your partner puts your money at risk. Consider forming an entity, such as LLC or corporation, which gives you legal protection.
Any informal business partnership is a ticking bomb. Eventually, it’s bound to cause you problems. If it’s business, it should be formalized.
4. Take Advantage of Retirement Accounts
ERISA-qualified retirement plans get unlimited asset protection. Up to $1 million in assets in an IRA are protected in the event of bankruptcy. Depending on the state, the level of protection may differ.
If your state offers generous options, you may want to consider moving some of the assets you won’t need until the retirement age into these protected entities. Even though there is a certain annual contribution limit, such a step can help you not to worry about compromising your retirement savings.
Remember that withdrawing funds before you reach the retirement age is possible. However, you will need to pay a fee. Retirement accounts are an excellent way to keep some of the assets safe while enjoying impressive tax benefits.
5. Offshore Accounts
One of the simplest ways to protect some of your personal and business assets is to move them to offshore accounts. Opening such accounts is 100% legal as long as you are ready to be transparent about them tax-wise. The U.S. judges don’t have jurisdiction over offshore trustees, making your assets inaccessible in case of a lawsuit.
Conclusion
Numerous ways exist to protect your assets today. Don’t wait until a problem arises. Trying to protect your assets when the lawsuit is already initiated is close to impossible. Use the above strategies to ensure your peace of mind.
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