Asset Protection

You’ve worked hard for your assets (not your biceps, friend). And, of course, you want to protect them. Asset protection refers to the strategies and techniques you’ll use to shield what you’ve got from creditors.

There are many ways that your wealth could be drained...from lawsuits against a business entity that doesn’t offer personal asset protection, to divorce and bankruptcy. That’s where a few helpful asset protection strategies come in handy.

One example of an asset protection strategy would be to choose an appropriate type of business entity. The rule of thumb for asset protection is that you want to separate your business from personal liability. Sole proprietorships and general partnerships DO NOT offer liability protection, thus disqualifying them from this category. If you get sued or owe a creditor money (in relation to your business), your assets are not safe. This is one of the many reasons to consider choosing a corporation or limited liability company (LLC) as a business entity (the type of business you establish).

To further protect your assets, you’ll also purchase appropriate insurance (including supplemental insurance), use retirement accounts to safeguard you in the event that bankruptcy becomes an unavoidable reality, set up a trust for your personal assets, and maybe even transfer assets to someone else in appropriate situations. All these strategies (and a whole bunch of strategies that we haven’t named in this short description) make up the concept of asset protection as a whole.