Six of the Best Ways to Protect Your Personal Assets

Finnegan Pierson

It is an exciting time to be an entrepreneur and investor. The digital age has expanded the ordinary person's reach so that many more can dip their toes into fascinating new realms of wealth creation. But the expansion of one's personal influence and activities opens them up to potential liabilities, and a threat to your assets can come from an unlikely place at the most inopportune time. Here are various ways to guard your personal assets.

Insurance

This is really the most basic tool that everyone should have in place. Whether your vehicle, business, or home, you should have the appropriate amount of insurance coverage to shield you from liability. Regrettably, even when people have insurance, they don't continually check that it covers their needs as life changes. Never hesitate to look for the top home insurance quotes or auto insurance deals from time to time. As your wealth and assets grow, so will your coverage needs.

Business Asset Separation

Everyone seems to have a side hustle nowadays. This is a testament to the rising spirit of the modern entrepreneur. It is initially the path of least resistance to function as a sole proprietor. However, if your business faces any level of liability in an incident, everything you own is up for grabs. The results may be devastating.

Be sure to set up any businesses you run as an LLC (limited liability company) or other separate entity. It is easy and inexpensive to do. Just as the name implies, it limits your liability in the event of an accident or circumstance in which the business is at fault. In general, only the assets of the company will be exposed to capture. But don't stop there. As your business grows, get the help of a financial manager to separate the assets the business uses from the operating company. If the operating business has to be shut down because of legal action, the assets will not be lost and can be leased to another operating company you set up.

Trusts and Protective Entities

If you transfer your assets to a trust or some other protective entity, you can control what you own without technically owning it. If you have ever wondered why some of the wealthy can go through bankruptcy and still retain a refined lifestyle, often employing a trust is crucial to preserving many necessary assets.

International Asset Protection

Some creditors will be dogged in their attempts to gain every last asset from a debtor. To buy yourself time and build up greater protection, consider incorporating plans that come under international jurisdiction. In essence, this adds foreign legal protections on top of already robust domestic asset protection. Since creditors have to go through the extra hassle to claim your assets, many will put the process on the back burner and go after lower-hanging fruit.

Liens on Assets

Another creative way to slow a creditor down and make the pursuit of your assets a poor use of their time is to encumber the property with a lien. Sometimes called a "friendly lien," the use of this technique requires solid legal advice so that you do not run afoul of the law. Simply put, a line of credit can be held against an asset. The lien is controlled by an entity friendly to you (such as an LLC you've created). Once again, be sure to get expert legal advice before attempting this measure.

Captive Insurance Company

What traditional insurance cannot cover, a CIC (Captive Insurance Company) may be able to protect. If an entity has unique liabilities that have a low probability of happening, a CIC may be able to provide the coverage. These risks are typically too expensive for a traditional insurance company to cover and are often only put in place in the case of exceptional circumstances.

There are many ways of protecting your assets, and what serves you best will depend on your particular wishes and needs. Research well and get the help of a financial planner to make sure you adequately protect yourself.