4 Tried and Tested Asset Protection Strategies
Regardless of the size of your business and the value of your net worth, you must protect the assets you worked so hard to obtain. There are several strategies that can help you safeguard these assets from shark creditors and competitors who want to get the most out of your earnings and properties, especially after your death.
The strategies listed below are legal practices used by business owners to protect their assets even after they are gone. Each strategy has their own advantages and disadvantages, so it’s best to seek advice from a legal advisor.
Asset Protection Trusts
Trusts protect your assets by putting them in a legal document enumerating all your properties–real property, business interests, and money–and the names of the beneficiaries who will receive them in due time. Trusts can either be revocable or irrevocable and can only be administered by a legal advisor from a trustworthy company.
Trusts mean that you guard your assets against illegitimate creditors in case they make claims and disputes over your property. Only those who are stated in the document can receive the stated assets and they can only claim them at the time you set. Trusts can be expensive, but at least you get to have full control over your assets.
Hiding your assets in a non-business account makes it more challenging for creditors to reach your assets and claim them unlawfully. You can hide these assets by using your businesses and stating the assets as accounts receivable.
Family Limited Partnership
When you transfer assets to a family limited partnership (FLP), they become protected from creditors under the Uniform Limited Partnership Act. The downside with this strategy is that the value of the asset exchange will be less than what it is originally valued at. Talk to your financial and legal advisor if this is the best strategy to use for your business.
Closely Held Insurance Company
You can buy insurance plans from Closely-Held Insurance Companies (CIC) for yourself as well as for your children. By paying a premium, you get to keep the money in these accounts, and make the amount obtainable and accessible by your heirs after you pass away. CIC can also defer the federal estate and gift taxes that your heirs would have to pay for the asset transfers.
Under a CIC, your assets are protected because they are no longer named after you, but instead under your children’s in a valid irrevocable trust. The transfer of assets also becomes quicker and disputes are less likely as you already stated how your assets are distributed.
Any of these strategies can save your family and beneficiaries from a number of headaches and court hearings. Especially if your net worth is substantial, your assets may be a root cause of family disputes and quarrels as to who and how much is getting what. Save your family the trouble by planning ahead using these asset protection strategies.
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