Asset Protection 101: What You Should Know

With over 40 million lawsuits filed annually in the United States, it’s essential to know how to protect your valuable assets and take action to protect them. Here’s what you need to know about asset protection.

What is Asset Protection?

Asset protection is a set of strategies intended to protect property from being seized by creditors. Asset protection strategies include trusts, LLCs, umbrella insurance, and prenuptial agreements. Protecting your assets is especially important if you’re in a high-risk occupation or have assets of significant value.

What is an Asset?

An asset is value property an individual or organization owns. There are various types of assets, including:

  • Current Assets: Short-term resources can be converted into cash within one year, including cash, accounts receivable, inventory, and cryptocurrency like Bitcoin. Current assets can also include prepaid expenses such as insurance, rent, and interest.
  • Fixed Assets: Longer-term resources such as buildings or equipment that can depreciate over time.
  • Financial Assets: Investments in the assets of other organizations, such as stocks, bonds, and preferred equity.

Threats to Personal Assets

Everyday situations such as negligence, accidents, or inability to meet financial obligations can threaten your assets unexpectedly. Common threats to your assets include:

  • Slip & Fall: If a homeowner fails to secure a carpet or a business owner fails to clean up a spill at work.
  • Car Accidents: If you’re at fault for failing to comply with local traffic laws, maintaining your vehicle in driving condition, driving while intoxicated, or texting and driving.
  • Debt: Unexpected debts like car accidents, medical debt, or inability to pay your mortgage that leads to foreclosure or loss of your home.
  • Divorce: The court orders you to pay alimony or child support while financially prosperous, but your income suddenly drops.

Threats to Business Assets

Accidents on Property

Slip and fall incidents can trigger lawsuits. For instance, if a business owner doesn’t maintain walkways properly, an employee fails to clean up spills, or sidewalks aren’t adequately cleared of ice during winter.

Product Liability

If a manufacturer creates defective products in the design or manufacturing process, liabilities can occur if manufacturers don’t provide instructions or adequate safety instructions. A lawsuit can also happen if a defective product causes damage or injures an individual.

Medical Malpractice

Healthcare provider negligence is a common risk to business and personal assets. Medical malpractice can happen from an incorrect diagnosis, improper medication prescriptions, and even surgical instruments left inside a patient during surgery. Nurses, physicians, and hospitals can all be held accountable for malpractice.

Worker Injuries

Examples of workplace injuries include an employee getting caught under or in between heavy objects, being struck by moving objects, ear damage from excess workplace noises, musculoskeletal injuries, burns, concussions, and falls from high elevations such as roofs and ladders.

Asset Protection Strategies

Protecting your assets is simply being aware of your responsibilities and ensuring your assets are adequately protected in case of a lawsuit. Here are some common asset protection strategies:

  • Insurance: People commonly use insurance to protect their assets. Aside from home and auto insurance, an umbrella policy can help defend your assets. An umbrella policy should NOT be a stand-alone but should supplement other forms of insurance to fill financial gaps not addressed by different types of insurance.
  • Retirement Accounts: Most state laws protect 401(k)s, IRAs, and other retirement accounts from creditors. However, this strategy has exceptions, such as paying federal taxes, alimony, or child support.
  • Prenuptial Agreements: Use this strategy to protect your assets before getting married in case of divorce. You can also use this strategy to protect an inheritance for children from previous marriages and protect one spouse from the other spouse’s debt.
  • Limited Liability Company (LLC): Creating an LLC is a common and simple tool for protecting your assets. One can then transfer real estate, vehicles, and other assets to shield them from lawsuits against the owners of the LLC.

Michaelson Law Can Help Protect Your Assets!

The best benefit of proper asset protection is peace of mind! If you have valuable assets at any age, asset protection will ensure your and your loved ones’ financial security. Our qualified estate planning attorneys at Michaelson Law can help you build an estate plan to protect your assets. Call us today!

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