5 Business and Financial Strategies to Protect Your Money

5 Business and Financial Strategies to Protect Your Money

 

These days, just about anyone runs the risk of an unexpected civil lawsuit which can cause severe damage to their personal wealth. These can range from liability claims for damage of property, divorce, creditor claims, bankruptcy, etc.  

It is of utmost importance to prepare ahead, and take the necessary steps to protect your assets from a civil lawsuit before it arises. Most of the tools and strategies used to protect your assets from civil liability are most effective if implemented long in advance of the lawsuit taking place.

In this article, we will look at some of these best asset protection strategies against civil lawsuits.

How Can I Protect My Assets?

1. Insurance

This may seem like an obvious asset protection strategy, but is something that many people overlook or fail to make sure that they are adequately insured. Many types of insurance policies provide liability cover.

These include dedicated liability insurance, as well as homeowners and auto insurance. You can also apply for financing to pay for insurance policies that could protect your assets. It is also advisable to set up a solid umbrella insurance policy to protect you against claims which exceed the maximum protection threshold of your base insurance policies. 

2. Structure Your Business as an LLC or Corporation 

These businesses are viewed as separate legal entities in the eyes of the law, and so you and your family’s personal wealth will not be at risk if a civil lawsuit is brought against the business. Likewise, if a liability claim arises against you during the course of your business, it is likely that the claimant will have to make a claim against the business itself, and not you personally.

In this way, your personal wealth is protected and out of reach. Even in this case, it is worthwhile ensuring that you have solid liability cover for both you and your business. Offshore LLCs in favourable foreign jurisdictions provide even greater asset protection, privacy, and other benefits, such as tax savings. 

3. Use an Asset Protection Trust

APT’s are irrevocable self-settled spendthrift trusts. That they are irrevocable means that the terms of the trust cannot be altered or terminated after the trust has been created, even by the grantor. This makes it extremely difficult for courts to rule that the assets in the trust need to be turned over to settle a lawsuit claim against the grantor.

They are also self-settled, which means they are one of the few types of trusts where the grantor can simultaneously be the sole beneficiary of the trust. This makes them perfect vehicles to securely house your personal assets and wealth. They effectively enable you to place your assets at arm’s length in a separate legal entity, whilst at the same time retain all benefits and control over the assets. 

4. Retirement & Offshore Accounts

ERISA-qualified individual retirement accounts (IRAs) are generally protected by federal law against threats like civil lawsuits and creditor claims. The level of protection varies depending on the state, with some providing complete unqualified protection (e.g. Florida), while others provide only weak or partial protection (e.g. California).

Opening an offshore account in an LLC overseas can also be an effective instrument in protecting your assets as it gives you a second legal system that can act as a shield against creditors. Having assets in a second country overseas is perhaps the single most effective strategy you can do to both protect and secure you wealth.

5. Homestead Exemption

Many states also provide a decent level of protection to home equity, meaning that your personal residence is protected against civil claims. States such as Florida and Texas provide unlimited homestead exemption protection, while others provide partial protection. 

This means that if you are sued, your spouse cannot be forced to sell their interest in the home, and vice versa. These titling laws are only applied in some states, so it is important to familiarise yourself with state laws where you live to determine whether this can be an effective asset protection strategy for you. 

Conclusion

The above list is just a few effective strategies which you can employ to protect your personal assets from civil lawsuits. There are many other possible ways to safeguard your wealth in addition to what we have mentioned here.

They will be able to consider all aspects of your personal situation and objectives, and help to tailor a plan which can provide the best overall protection for the lowest cost. 

The more assets you own, the more important it is to take the time to ensure that your personal estate is properly safeguarded against external threats such as civil lawsuits.