I’ve heard it many times from clients and friends that they’re “not rich, so why would I need that?”
I guess many people might just watch too much TV. They assume (hope!) that just because they are not mega-millionaires, that they don’t need to worry about the same types of things that the ultra-rich have to worry about.
It is true that the plan might be able to be much simpler if you don’t have that much in assets today, however if you don’t have a plan at all to protect your assets, life gets extremely complicated when a challenge arises.
The below are some important issues you may want to consider when working on your plan to protect your family and assets, and as you read them, you will begin to realize that there are several creative strategies you will be able to put into play almost immediately.
1. Owning a Business
Business owners get to generate wealth for themselves and their families at a higher level than if you are working for somebody else as an employee. However, there are also risks associated with living at that higher level.
You should ensure that you form a business structure that will work for the type of business you want to run, and one which gives you some liability protection. For example, if you operate as a sole proprietor or general partnership, you could be personally liable for any business debts or lawsuits that come about because of your business.
Many small businesses can be flexible and still enjoy the benefits of having a limitation of liability shield, by forming as a limited liability company or as a S-corporation. If you maintain the business properly, the company structure will be able to act a wall between your personal assets and litigious creditors to your business.
2. Statutory Exemptions
Take a look at your state and federal laws to see if you can take advantage of any rules that could make your situation exempt from having creditors make claims against your assets. Many states offer homestead exemptions, which to a certain degree can protect your primary residence from creditors seeking to enforce a judgement by going after your assets.
There are laws that protect retirement plans such as your 401k and IRA, while some states can offer significant protections on insurance policies and annuities also.
The exemptions you find will likely not be able to protect all of your assets, but they can help you get part of the way there. And you can find that protection to be relatively cheap too, because you just need to be able to understand them in order to take advantage of the strategies they offer.
3. Insurance Policies
While insurance products and sales reps often get a bad rap, insurance should always be part of your asset protection strategy. If you are ever sued, having to defend and possibly pay out at the end of it all will be extremely costly.
Sometimes things do not go your way, even if you have done all you can to plan and protect your business. And insurance should be there to help shield you from those effects. Make sure to understand what kinds of insurance products you might need (health, homeowners, life, automobile, etc.), and you can even think about getting an umbrella policy to cover any risk left over that you might have missed, or that might exceed your coverage limits of the other policies.
4. Estate Planning
I’ve heard it said that no one gets out of life alive. The other potential liabilities discussed above might happen, but at some point, your loved ones will definitely have to deal with not only your loss personally, but how to deal with what you left behind. Will it be a mess, or will it be orderly?
Remember, how you leave your estate often ends up being the last memory your loved ones have of you. The fewer decisions they have to make to figure out what you might have wanted (even if you don’t care!!) is one more moment they will have to process their grief and keep moving on with their lives. Often, those decisions you make so they don’t have to are fights that you get to keep from happening, so that traditions and legacies you leave behind can continue.
You don’t need mega-millions to be able to protect your family and your assets. Don’t put it off, and remember that the planning you do is not for you, but for those you leave behind. Make sure their last memory of you is one you will be satisfied for them to have.
The attorneys at HPS Law Group LLC can help you with putting these strategies into play. Give us a call or reach out with an email to set something up.