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Asset Protection Planning: How Do You Go About Protecting Your Assets?

Estate Planners | Monday, November 1st, 2010

Proper asset protection should be an important part of financial planning. Without a good plan in place, everything you’ve worked so hard for could be seized as a result of a lawsuit, judgment, or other situation that could jeopardize your finances. However, asset protection is one of those things that you must plan ahead for. If you wait until you find that you really need it, in most cases it will be too late. Having a solid asset protection plan in place will provide you with the peace of mind of knowing that you, your family, and your business are protected.

Planning for Asset Protection

Because most people are not familiar with all the various rules that regulate asset protection, it is generally advisable to work with a professional planner or an attorney. Performing an asset risk analysis is often the first step. It’s important to take stock of your current financial assets, any existing current business ventures as well as any ventures you plan to pursue in the future. Your occupation and family situation should also be taken into consideration. The likelihood of future liability and exposure should also be analyzed, along with the size of your estate and the kinds of assets you possess. Examining all these factors will help determine your level of risk and exposure, which can be useful when deciding on the best plan to protect your assets. Scenarios can then be evaluated which can help determine what level of protection is needed. Although some asset protection planners do have pre-packaged solutions that they often use, it’s usually best to work with a planner who will customize a solution to meet your exact needs.

What Assets Should Be Protected?

The answer to this question of course depends on each situation, but as a general rule, cash, real estate and income stream are among the easiest assets to seize. Laws vary by state in regards to what assets are considered to be exempt versus non-exempt. Understanding the state laws is very important when planning asset protection. Protecting your non-exempt assets is of course of the utmost importance, but you shouldn’t count on exemptions for asset protection. If there is any perceived level of risk to your assets, even if they are currently considered to be exempt, you should plan to protect them.

Asset Protection Methods

There are a number of different asset protection methods that are often employed. Limited partnerships and family corporations can be good ways of separating and protecting your personal and business assets. Gifting property to children and other family members is also a method that is commonly employed. Even the temporary transfer of assets to the account of another family member can be a useful strategy under some circumstances. In some situations, asset planning can also have additional benefits, such as potential tax savings and the peace of mind that comes with knowing that your estate has been planned for. As part of a comprehensive plan to protect one’s assets, it is common to consult with a combination of estate planners, CPAs, financial planners, asset professionals, and attorneys, in order to make sure all risks have been accounted for.

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