When facing a lawsuit, you and your business will most likely be in danger, as well as a bulk of your assets. However, if you have been careful, you would be able to protect those assets from being lost.
But it’s not just lawsuits you need to protect your assets against. There are several options available and you should be using any or all of them to keep your investments from being seized.
Whether it’s basic insurance or using captive insurance law, insurance is among the first layers of defense against lawsuits and other entities that going after your assets. The simplest form is liability insurance, which protects you from many incidents. Your insurance should cover your total net worth. That means if your net worth is $3 million, you should get insurance for $3 million.
More complicated forms of insurance, such as captive insurance, allow for better asset protection but you’re going to need experts to help you with that.
Think Twice About Sole Proprietorship
Though it feels good to say that you are the sole owner of a company or a business, it exposes your assets too much to risks. Any lawsuit will completely target the assets that you directly own. Work with a lawyer to set up a limited liability company or an S corporation. This should spread out your assets a bit and protect them in the process.
Formalize Business Partnerships
Sometimes, the threat to your assets comes from the ones that you trust the most. Business partners are a great help when dealing with a business, but they can also bring problems to your door. Do not have “handshake” agreements with your partnerships. Have a clear legal document that completely outlines your business relationship and ensures that you are protected from lawsuits stemming from your partner’s actions.
Use Legal Protections
There are laws in place that would allow you to protect some of your assets. For example, traditional and Roth IRAs have a $1 million protection cap against bankruptcy proceedings. If you need to file for bankruptcy, knowing that you’ve got a million dollars stashed away can reduce most of your worries. Many options are available to those who want further asset protection. Consult a lawyer to learn what laws would be useful in sheltering your assets.
Create a Trust
Offshore trusts are a great way to sock away some money when you’ve hit a windfall. They can be hard to establish and maintain, though. Fortunately, some states like Alaska and Nevada offer asset protection trusts that function in the same way. You just need to follow some strict rules, but you should be able to use them to safeguard your assets.
Your assets are the products of your hard work and it would be unfair to watch them being taken away. Adding some layers of protection over them ensures that even if someone goes after them, you can have peace of mind knowing that you will retain your assets. It’s time to do something for your future.