You may not be thinking about asset protection yet, but regardless of how much wealth you may have accumulated, there are certain asset protection strategies that you should consider. This is particularly true when you are receiving an inheritance, proceeds from a lawsuit, the sale of stocks or securities, or any other circumstance that will potentially increase your wealth. Our Overland Park asset protection lawyers can explain these various strategies to you and help you make a choice.
Consider rearranging jointly held accounts
Money that you have deposited into a joint account with your spouse, child, parents, roommate, or business partner could potentially be at risk if any of those individuals have debts or other financial liabilities. For instance, if your roommate or business partner gets divorced or has a judgment entered against him, the entire account could be relinquished to cover those responsibilities. That includes your portion of the account, as well. If having a joint account is your only option, then our Overland Park asset protection lawyers recommend keeping the balance in the account as low as possible so there is less to lose.
Establishing an irrevocable trust for asset protection
If the goal is to protect your assets from creditors, that can be done using various types of trusts. However, the best option is usually an irrevocable trust. When a trust is “irrevocable” that means the terms of the trust cannot be modified or rescinded once it has been created. When you transfer your property to the trust, that property then belongs to the trust. Because it is irrevocable, the assets are no longer considered yours. As a result, that property is no longer subject to your creditors or other legal liabilities. Irrevocable trusts are a great way to protect assets that you do not presently need. If you have questions, our Overland Park asset protection lawyers can help.
Be sure to have sufficient liability insurance coverage
When it comes to litigation, the first line of defense is having sufficient liability insurance coverage. This is particularly true when you own a business or work in certain professional occupations like law or medicine. Our Overland Park asset protection lawyers suggest that, if you do not already have coverage, you need to purchase a policy. If you have one, then let us review your coverage and help you determine whether it is sufficient. You may need to increase 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 actually receive the inheritance or settlement.
Selecting the right business entity to manage rental property
If you own rental property or anticipate investing in rental property, you should first create a business entity such as a Limited Liability Company (LLC) or a corporation to protect your other assets from a disgruntled tenant. That way, if a renter sues you for any reason, the only assets at risk are those held by the entity that holds the real estate. The rest of your personal assets will be protected from a lawsuit or legal judgment. It is also wise to create a separate business entity for each rental property you own.
Create formal business partnerships
Business partnerships can easily be a source of liability. Why? Similar to joint accounts, you are responsible for the actions of your partner, which 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 risk. The best advice is to avoid basic partnerships and create an LLC or other business entity that will provide you with legal protection.
Create business entities to protect your assets
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.
Overland Park asset protection lawyers may have more strategies
Estate planning can accomplish many things, including protecting your assets. Guarding your property against creditors is essential to preserving your estate for your heirs. Creditors include bill collectors and anyone else who may have a legal judgment against you. Everyone can benefit from an asset protection plan, but you must create that plan before it is too late.
Join us for a FREE workshop today! If you have questions regarding trusts or any other estate planning matters, 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!