Planning | Asset Protection Basics

Asset protection is all about planning and using legal techniques to prevent creditors or judgments from taking away your wealth.  There are several steps that should be taken to protect yourself.

1.  Put your assets in the most protected shelters.  401k and IRA plans offer significant protection from creditors 

2.  Purchase enough liability insurance to protect you major exposures.  In dealing with my insurance clients, I often analogize an umbrella to a wall that stands between you and the person sueing you.  Make sure this wall is large enough to protect your assets.

3.  Use business entities such as corporations and LLC's to separate yourself from your business interests.  Keep you business assets and personal assets as separate as possible.  While this is a critical step that should never be overlooked, it is important to remember that closely held business entities face the possibility of piercing the corporate veil so make sure you have proper legal advice to prevent such an incident.

4.  Do not put vehicles in your company name.  This increases the likelihood of your company being sued if you are in a collision.  There are other ways to manage and deduct vehicle expenses so talk to your CPA.

5.  Diversify your holdings.  Make sure an adverse event in one business or holding doesn't wipe you out.