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Business Assets | Business | Abigail Kuhn | Kuhn Consulting & Design | Risk Proofing Your Wealth

9 Benefits of Personal and Business Asset Protection: Risk-Proofing Your Wealth

9 Benefits of Asset Protection:
Risk-Proofing Your Wealth

Today’s post is a little different, but one that is definitely something to think about when you’re running a business and thinking about how you are structuring it. This is something to think about when you decide if you want to do an Sole Proprietorship, LLC, Incorporate, etc. Whether you’ve looked into these aspects or not, your business assets could be at risk. Read on to find out why…

You’re a successful businessman and you’re at the receiving end of a lawsuit. Its judgment day, and despite assurances from your lawyer, you’re tense and worried. You begin to wonder why you didn’t take adequate precaution to protect your assets. It’s commonly assumed that one’s home is safe. Usually, business assets are the first to be liquidated to square one’s liabilities. In reality, the home may be the first asset to go under the auction gavel.

Business Assets | Business | Abigail Kuhn | Kuhn Consulting & Design | Risk Proofing Your Wealth

Wouldn’t you be better off taking preemptive action to ward off risks than to rue losses as chapters in life’s lessons learned? The benefits of asset protection are greater than you can imagine.

Benefit #1: Asset Protection Brings a Paradigm Shift in Your Attitude Towards What You Own

It’s true one doesn’t start a business anticipating a loss, you don’t buy a car thinking you’ll meet with an accident, you don’t build a home fearing it’ll crumble one day. You do all this and more as you grow your business, earn profits, and diversify investments. Just as we are quick to reap the benefits of success, we ought to be wary of the responsibility that is thrust upon us when our assets grow. Asset protection brings good news. When you make an effort to protect what you’ve grown through hard labor, you begin to secure the future and your family, and possibly two to three generations down the road.

Benefit #2: Asset Protection and Estate Planning Safeguard Your Property Today, Tomorrow, and Beyond

You are mortal, you can’t hang around forever. You could use asset protection strategies to safeguard what you own today. But what about the future? Will your descendants be able to weather legal storms? Estate planning is nothing but an asset protection strategy telescoped to the future giving you the opportunity to frame a response to unforeseen happenings. Granted, you won’t be around to enjoy the protection of estate planning but your vision protects coming generations.

You can provide for a Unified Credit Bypass Shelter Trust or UCBST that comes into being following your death. The estate and its earnings pass on to the surviving spouse without adding to the spouse’s existing tax liability. The wise move helps the survivor avoid estate taxes and will not add to his or her existing tax burden. This is an astute move that neatly nullifies potential lawsuits from heirs and property seizure threats by creditors.

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Benefit #3: Asset Protection Helps to Separate Business Assets From Personal Assets

This is a significant benefit arising from asset protection strategies. Usually, one partner operates the family business, while the spouse controls the title to family assets. If the non-business partner were to join the business as a co-owner there is the risk of the IRS, a third party or a creditor holding both partners jointly responsible for losses.

If businesses are partnered or under co-ownership, this raises the danger of family assets being pooled with litigated business assets. By separating the title ownership of assets, an asset protection strategy offers ample safeguards to protect personal and family assets against external claims.

Benefit #4: Asset Protection Helps You Re-title Assets and Name Beneficiaries

An asset protection strategy helps you review your entire asset portfolio (business and personal) to re-title assets and provide for beneficiaries to ensure that the estate doesn’t fall into wrong hands. But you need to do re-titling within the ambit of existing laws to ensure the title transfer is not viewed as fraudulent. Courts don’t look kindly at title transfers hurriedly performed just prior to or after a civil suit. An estate planning lawyer will help you negotiate a minefield of litigation, ensuring that asset re-titling takes full advantage of legally admissible tools such as your Will or a Trust.

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Benefit #5: Asset Protection Shields Retirement Benefits From Creditors and Adverse Court Judgments

A full-fledged asset protection plan ensures the safety of existing assets, and a meticulously designed estate plan safeguards your property in the far future when you’re no longer around. That leaves a very important chunk of money that goes into the retirement fund. How do you ensure that the money that you’ve painstakingly accumulated in the pension fund doesn’t become the subject matter of a lawsuit?

The best protection from creditors and courts comes from joining a qualified retirement plan that is covered by the Employee Retirement Income Security Act (ERISA). Remember that judgment creditors can’t extract a dollar from employee profit-sharing plans, Employee Stock Ownership Plan (ESOP) money, money purchase pension plans, target benefit plans, and 401(k)s.

Benefit #6: Transferring Property to an Irrevocable Trust Protects Assets From Creditors

The irrevocable trust is an asset protection strategy that safeguards property from creditors. Once signed and fulfilled, such a trust can’t be changed or modified by you. Naturally, a creditor can’t attach or seize an asset that is no longer controlled by you. Once the property gets transferred to an irrevocable trust, the creator is no longer the owner. The ownership vests in the trustee who holds the property for aiding the beneficiaries named in the trust.

As an additional precaution one can identify a trustee operating independently and professionally to avoid any conflict of interest with beneficiaries.

Benefit #7: Acquiring Long-Term Care Insurance Is a Form of Asset Protection

It is estimated that America has close to 75 million baby boomers that are moving into senior citizenship category. The rising cost of private nursing care and assisted living places a potentially huge burden on the family, especially families caring for disabled and sick individuals. Purchasing Long-Term Care insurance when rates move favorably acts as a hedge against acquiring a financial liability decades down the road when family income levels plateau or climb down. The right policy should bestow many benefits:

  • Such a policy usually covers nursing home care, assisted living facility, and provision of adult daycare, respite care, hospice care, Alzheimer’s, and home modification tools for the disabled.
  • The cover can be obtained either on an individual basis or by way of the employer-sponsored plan.
  • A daily benefit is allotted for nursing home care.
  • The daily benefit will be inflation-proofed.
  • There’ll be maximum allowances payable over a certain duration.
  • Certain illnesses or disorders will be specifically insured.
  • The joint spousal cover will carry extra benefits.
  • A waiver of premium benefit will be available if the beneficiary becomes severely disabled.

So in a way, the long-term care insurance policy ends up protecting your assets because you avoid paying from your pocket; the insurance coverage takes care of healthcare expenses.

Benefit #8: Creating a Foreign Trust Is One of the Strongest Asset Protection Measures

Shifting an asset abroad and creating a foreign trust is one of the most effective ways of shielding assets from lawsuits. This places the asset outside the jurisdiction of local courts. It is legal and a perfectly acceptable way of protecting business assets. Your only obligation is to inform the IRS of its creation through the appropriate form and to annex the form to your personal tax return. Expert international business consultants oversee the formation of the trust and help you fulfill regulatory compliances. They see to it that you follow the right asset protection strategy which safeguards your interests in a volatile and ever-changing market.  

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Benefit #9: Asset Protection Comes to Your Help in Bankruptcies

If you file a chapter 13 bankruptcy, almost all your properties can avoid liquidation provided you show enough income to repay debts in periodic installments. In many states, motor vehicles, homes, household belongings, furnishings, and garments are protected from creditors. Social security money, retirement accounts, pensions, 401(k), and profit-sharing plans also enjoy full protection. In a chapter 7 bankruptcy, only exempted properties enjoy asset protection. Being forewarned is important.

Re-titling is one of the ways of moving sensitive assets into exemption listings for maximum protection if finances nosedive into a bankruptcy filing. Shifting a cluster of assets to an irrevocable trust is another solution for shielding assets from predatory creditors. Encumbering (taking a loan against) your asset or availing credit against amounts receivable in your business make the assets unattractive to a Chapter 7 liquidator.

A meticulously crafted asset protection strategy is akin to navigating a heavily armor-plated tank across a treacherous minefield. Rockets may wiz by, missiles will explode, but you reach your destination unscathed, launching a couple of bazookas of your own. Asset protection delivers tremendous benefits for both personal assets and business assets. It’s your way of preserving and enjoying what you worked so hard to create. It protects you, your family, and your personal assets and business assets today and tomorrow and possibly many generations that’ll follow in your footsteps.


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