Protect your assets before you have the problem. Let’s face it, wherever you go there are vultures trying to rob you of your assets. Whenever I travel I notice that smart tourists secure their money and other valuables in money belts, multiple pockets, purses, or wallets to help prevent losing everything from a pick-pocket. You need to protect your assets using the same strategy.
If you put your assets in multiple “places,” the vultures, who are circling overhead, won’t be able to take down your whole fortune. Most Americans are too busy making money to take the time to protect their assets. They put all their money into a bank or brokerage account with their name on it and hold their house in their own name. When the vultures come after them it is pretty much a direct path to their wealth. Everything is held in one big place.
Avoid owning assets in joint ownership. When you do that, each joint owner is a direct pathway through which the vultures can strike the assets. How are you holding your real estate, bank and brokerage accounts, cars, and other assets? Take a moment to think about protecting your assets. If you own assets jointly, now is the time to make a change. What about your business ventures? How are they held? What if your business is sued or fails? Are both you and your spouse open to attack? Are all of your individual and joint assets are exposed?
Strategies to Protect Your Assets
Here are some strategies to help you protect your assets. Assets and ventures that have a high likelihood of lawsuits or bankruptcies should be “owned” by just one family member. It is not a good idea to have your spouse’s name associated with your professional practice or business. The truth is that as a professional, you are legally liable for your mistakes and conduct. Therefore, you will always be a target for those hungry vultures.
If you are a non- professional business owner, you can protect yourself from your business activities by using a corporation or limited liability company (LLC). This will protect your assets from your business troubles. Professionals should also run their business as a corporation or LLC, but the entity may not protect them from their own malpractice. It can protect them from acts not related to their “professional conduct”. For example, say there is a slip and fall in the office, they would be protected from this business problem.
Protect your assets on a personal level too. If you are married, you and your spouse should each become a separate “place” to hold different assets. Because the vultures are always circling, you should be the sole owner of the risky assets and ventures. It is a good strategy to have your home, big savings accounts, brokerage accounts, real estate limited partnership interests, and other assets that have a low probability of risk “owned” by your spouse or family members. In more than one case, I have seen this division of property protect a good portion of the family’s property from lawsuits, creditors, and even the IRS. Watch out if you live in a community property state. You will need to use family members in preference to your spouse, because spousal assets are automatically legally tied together.
Protect Your Assets from the Banker
If you need a loan, be shrewd with your banker. When you apply for a loan, never pledge more property than is necessary to qualify for the loan. Keep your assets private. Don’t brag to the banker about your many assets. If you say you have $4 million in property, the banker will want all $4 million as security. You don’t have to list everything on the loan application. Your salary will often be sufficient. If you flash around a big asset sheet you are not just impressing the banker, you are giving more collateral than you need to. This is not only foolish, it is unnecessary.
Never list your spouse’s property on the application, unless you just cannot qualify otherwise. The lender can readily take their property listed as security if your loan defaults. Of course, you don’t expect to default on the loan, but it does happen. Never have your spouse sign on a business loan. In most states only the signer’s property is available to satisfy the loan if disaster strikes. They will try to pull the spouse in by getting both signatures, but hold your ground. It could save you a lot of grief someday and protect your assets.
It will not only protect your assets from the banker, but when the big lawsuit comes, the first place the attorneys will go is to your loan applications. They can easily see all those assets you used to impress your banker.
Finally to protect your assets, choose your attorney and accountant wisely. In the long run, a good professional who charges more, is always cheaper than a bad professional who charges less. Good professionals will give you service worth more than their fees. A professional with a proven track record, who actually cares about you, and answers your questions and concerns, is one who you should look for. The secret to getting what you need from a professional is knowing enough to control them and not be controlled by them. It is amazing to see very bright people who are controlled by professionals, because they haven’t done their homework. Fees can be kept to a minimum if you educate yourself. Take a look at Protecting Your Financial Future so that you can learn the secrets to working with your professionals and protect your assets from the circling vultures.