Asset Protection is Life Planning
What is asset protection?
Unlike estate planning that is set in place to protect your assets after you’re gone, asset protection is about protecting you from what can happen during your lifetime. It is the holistic practice of taking a proactive stance in managing risk, both personally and professionally.
Why have asset protection?
The United States has the world’s most litigious legal system. The costs of a frivolous lawsuit can measure in the tens of thousands of dollars, quickly able to drain your resources. You can face this liability in many aspects of your life: as a physician, a business owner, a parent, the driver of a vehicle, a homeowner, etc. Having a defensive strategy helps you put a system of risk mitigation into place to protect your assets.
What are the layers of asset protection?
Asset protection emcompasses many layers. There are tools you can use in your strategy and systems of good habits and disciplines that apply directly to your lifestyle.
Layer 1: The best way to avoid a conflict is to be aware of where you may have risks. Awareness of potential risks and then managing to mitigate those risks is your first step to protecting your assets. Depending on how many layers of risk management you implement will determine how much you must make sure you have the proper compliance procedures and documentation you need to consistently enforce. Implement these systems into your professional relationships by having clear expectations and boundaries that all of your employees and clients are aware of. On a personal side, know where you might have exposure and then look at ways to reduce your risks.
Layer 2: Once you are aware of your exposures to risk, make sure you are properly equipped with the types of insurance you need to manage them. Consider your profession, your lifestyle, your age, health, and family circumstances.
Layer 3: Have defensive legal structures in place. There will likely be gaps that exist after insurance coverage, as “umbrella” policies don’t always fill in all the spaces they are needed. In combination with proper financial planning and use of insurance, lawyers have techniques that can be applied as another layer of protection: trusts, LLCs, corporate structures, partnerships, and estate planning techniques. Legal structures are the back-up to your back-up. Be familiar with your areas of risk and prepared for what you have to do should the need arise.
What does asset protection achieve?
Beyond the fact that asset protection mitigates risk and defends your wealth, profession, and lifestyle, having an asset protection plan in place removes the incentive to sue you, creates an incentive to settle within certain limits if there is real liability, makes you largely uncollectible in the case of a lawsuit not ruling in your favor (i.e. the insurance covers your liability losses), and can let you legally separate personal and business exposures and assets.
Asset protection is a key aspect of a strong financial plan. If you would like to talk further on how you can protect your assets, reach out! We are available at (480) 214-9596 or info@scfinancialservices.com, we offer a 30 minute no obligation consultation to assist you with these questions.
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