The recent flash flooding in Kansas City in late July resulted in swelled creeks and water damage to many buildings in south Kansas City. Luckily there were no serious injuries reported. However, one local business owner returned to assess the damage to her business. This reminds us of the need for asset protection, whether you are a business owner or an individual.
Missouri flash flooding leads to water rescues
Both Cass County and Jackson County in Missouri were under flash flood warnings in late July, warning residents not to drive into flood waters following rainfall of anywhere between three and six inches across the counties. Indian Creek actually hit a new record, cresting at 27 feet. The result was the need for several water rescues after people refused to heed the warnings.
Kansas City salon owner assesses flood damage
The Genesis Salon, located on 103rd Street, fell victim to the recent flash flooding. As the hair salon owner returned to her property to clean out the building, she and her family hoped they could salvage some of the business assets. Cleaning off muddy chairs and shampoo bottles, they were able to save some things. But much of her business was gone. The ceiling was coming down and the wall was buckling.
Next door to her salon, sat a barber shop and nail salon which were both destroyed. Unfortunately, the salon owner’s business property insurance does not cover flood damage so they may not be able to rebuild. Luckily, no one was injured.
The purpose of asset protection
Creating an asset protection plan simply means analyzing your assets and organizing them in a way that provides the best possible protection against unnecessary risk or loss. Contrary to what some people believe, when done correctly, asset protection is completely legal. The complexity of your plan will depend on the size and nature of your estate, but your estate planning attorney will be fully capable of helping you minimize your risks. With the proper plan, you can be prepared for any unexpected circumstances that would otherwise put your assets at risk. You can do this without any form of tax evasion or fraud.
When to start asset protection planning
In order for your plan to be the most effective, it is necessary to put that plan in place long before debts and legal claims arise. If not, any attempts to move your assets around after a claim has been made or a lawsuit has been filed could appear to be a fraudulent transfer. Another reason for planning early is that most clients are not adept at recognizing potential sources of liability that would put their assets at risk.
Keep your personal assets separate from your business assets
If you own a business, it is crucial that you avoid commingling your business and personal assets. There are specific types of business entities, such as Limited Liability Companies (LLCs), which are specially designed to protect the assets of the owner. However, they can only provide protection if they are operated correctly. In other words, if personal assets and business assets are not kept separate, even the owners of LLC’s will run the risk of putting their personal assets at risk.
Using a trust for asset protection
The most common estate planning instrument used for asset protection is an irrevocable trust. When you transfer assets to an irrevocable trust, they are essentially no longer a part of your estate. For that reason, they are considered to be outside the reach of creditors and legal claims. They are also no longer subject to estate taxes. Trusts can be very flexible and customizable, with different types of trusts having different purposes and benefits. So discuss all of your options with your estate planning attorney to determine the right plan for you.
Liability insurance is an option for supplementing your protection
Liability insurance is another way to provide asset protection, especially for homeowners and business owners. If you are required to defend a lawsuit, for instance, your liability insurance provider will handle your defense and pay any settlement or judgment, if necessary. This is a good supplement to have because an asset protection plan is not really designed to defend legal actions or pay attorney’s fees. For that reason, business and home owners should not substitute an asset protection plan for proper liability insurance.
If you have questions regarding trusts or any other asset protection strategies, please contact the experienced attorneys at Gaughan & Connealy for a consultation. You can contact us either online or by calling us at (913) 262-2000. We are here to help!