If you own a small business or do part-time work on the side without a formal business structure such as an LLC or a corporation, that means you are operating as a sole proprietorship. Although being a sole proprietor means it’s just you, unlike a partnership, all of your personal assets are at risk if you are sued because there is no real delineation between you and the business. So, be sure to create a business entity that will protect your personal assets from lawsuits against your business. … [Read more...] about What if I own a business?
Business partnerships can easily be a source of liability. Why? Similar to joint accounts, you are responsible for the actions of your partner, that includes any liabilities. However, unlike a joint account, a lawsuit against your partner can put all of your assets at risk. For instance, if you and a friend come to an informal agreement to provide consulting services and your “partner” is involved in a legal dispute regarding your consulting services, your personal assets could likewise be at … [Read more...] about Will my informal partnerships make me vulnerable?
Any money you deposit into a joint account with your spouse, child, parents, roommate, or business partner is at risk based on any liabilities that other person may have. For example, if your business partner files for divorce or incurs a lawsuit judgment, the entire account could be wiped out, including your portion. If you must have a joint account, keep the balance as low as possible. … [Read more...] about How safe are jointly held accounts?
Your first line of defense against potential litigation, especially if you own a business or work in a professional field such as medicine or the law, is liability insurance. If you don’t have coverage already, obtaining coverage should be a priority. If you already have a liability policy, consider increasing your liability limits. The key is to make sure your personal umbrella liability coverage is at least equal to your new net worth. It is usually wise to take care of this before you … [Read more...] about How important is liability insurance?
In order to guarantee that your property will truly be protected, there are specific terms you need to include in your trust agreement. For instance, any interests that you leave to your beneficiaries must either be dependent on a future occurrence or subject to the trustee’s sole discretion. An optional but very useful provision is known as a “spendthrift” provision. A spendthrift trust is created for the benefit of someone who is essentially unable to manage his or her finances or control … [Read more...] about What is required to ensure asset protection?
The term “irrevocable” means that the terms of the trust cannot be changed or revoked once it has been created. Protection from creditors can be achieved with various types of trusts, but the most effective type of trust for asset protection is an irrevocable trust. When you transfer your property to a trust of any kind, that property now belongs to the trust. Since the trust cannot be revoked or modified, the assets are no longer considered your property. As a result, the property in the … [Read more...] about What type of trust is better for asset protection?
Constructing an asset protection plan requires a careful analysis of your assets and reorganization of those assets so that you can provide maximum protection against risk or loss. A common misunderstanding that clients have is that asset protection involves some type of fraud or “hiding” of property. This is certainly not the case. When done appropriately and within the requirements of the law, asset protection is completely legal. You can be prepared for nearly any unforeseen situation … [Read more...] about What is the purpose of asset protection?