Asset Protection Tips You Can Use Now
A common misconception is only wealthy families and people in high risk professions need to have an asset protection plan. In reality, anyone can be sued. A car accident, foreclosure, unpaid medical bills, or an injured tenant can result in a monetary judgment that will decimate your finances.
What Exactly Is Asset Protection Planning?
Asset protection planning is the use of legal structures and strategies to safeguard property creditors might snatch away by completely, or, at the very least, partially, protecting it from the creditor’s reach.
Unfortunately, this type of planning cannot be done as a quick fix for your existing legal problems. In fact, if you transfer assets to shield them from existing creditors, it could be considered a fraudulent transfer, resulting in legal penalties. Instead, you must put an asset protection plan in place before a lawsuit is imminent, let alone filed at the courthouse. So, now is the time to consider implementing one or more of these tips.
Below are two tips that you can use right now to protect your assets from creditors, predators, and lawsuits.
Asset Protection Tip #1 – Load Up on Liability Insurance
The first line of defense is insurance, including homeowner’s, automobile, business, professional, malpractice, long-term care, and umbrella policies. Liability insurance not only provides a means to pay money damages, it often includes payment of all or part of the legal fees associated with a lawsuit. If you do not have an umbrella policy, now is the time to get one, since it is relatively inexpensive compared with more advanced ways to protect your assets. You should also check all of your current insurance policies to determine if your policy limits are in line with your net worth and make adjustments as appropriate. You should then review all of your policies on an annual basis to confirm the coverage is still adequate and the benefits have not been stripped to maintain the same premiums.
Asset Protection Tip #2 – Maximize Contributions to Your 401(k) or IRA
Under federal law, tax-favored retirement accounts, including 401(k)s and IRAs (but excluding inherited IRAs), are protected from creditors in bankruptcy (with certain limitations). Therefore, maximizing contributions to your company’s 401(k) plan is not only a smart way to increase your retirement savings, but it will also safeguard the investments from creditors, predators, and lawsuits. On the other hand, if your company does not offer a 401(k) plan, then start investing in an IRA for the same reasons.
You have worked hard to accumulate the assets you have. Do not let a lawsuit take it all away from you. Give us a call today at 301.892.2713 so we can evaluate your situation and craft an asset protection plan that best serves you and your family.
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