When you begin to accumulate wealth, you begin to realize that there are people and creditors who want a piece of your assets. There are tools you can use to protect yourself and your business that can go a long way to ensuring that tax collectors, accident victims and credit card issuers don’t succeed in getting at your hard-earned money.
The first tool to protect yourself with is liability insurance. If you go ahead and buy an umbrella policy under your homeowner’s policy that may be a good line of protection for your home and personal property. For your business, getting coverage under a business insurance policy is a good idea. The extra bit you pay for these extended policies is small compared to the amount you would pay if you are ever sued in a court of law in New York.
Getting a Declaration of Homestead is the second tool in your belt to protect your assets. Since your primary residence may be your biggest asset, filling out the form and paying a small fee seems like a positive move.
Generally speaking, creditors can only reach for those assets that are in your name, so protecting yourself by putting your investments and other more valuable assets in your spouse’s name can go a long way to guarding your wealth.
Having only your income and business assets in your name, and not your personal assets, will also ensure that you are in a good place financially.
If you are in business for yourself, becoming a limited liability company, a corporation or a limited partnership may be something you want to consider. Only the business assets will be reachable by creditors because these types of companies protect your personal assets.
Putting your wealth in a trust can help you keep what is yours. An asset protection tool must be irrevocable and must become the owner of the property. Once these are in place, the money no longer belongs to you and cannot be used for claims filed against you.
Knowing how estate planning can be done is empowering. It is important to know that there are several different avenues you can take to protect your property and assets.
Source: The Spectrum, “Asset protection in estate planning,” Brent Shakespeare, April. 02, 2015