No, wealthy people or those in high-risk professions aren’t the only ones that need to worry about lawsuits. The truth of the matter is, anyone can be sued, and irrespective of how high your net worth or how risky your job is, it’s a good idea to have an asset protection plan in place. Injured tenants, unpaid medical bills, foreclosures, and car accidents can happen to anyone at any time, and the resulting monetary judgement can overwhelm your finances if you aren’t ready. As an asset protection specialist, we offer you three tips that you can use right now to protect your assets from lawsuits and creditors.
Secure liability insurance
Liability insurance (including malpractice, business, auto, homeowners, umbrella policies, and long-term care) can assist you in paying for monetary damages in case of a lawsuit, and your policy may also consist of payment of your legal fees. Umbrella policies are perfect, they’re relatively cheap and can safeguard you from the truly unexpected events that some other methods ignore.
While you’re assessing your insurance safeguards, start checking your current policies on an annual basis to ensure your policy limits align with your varying net worth and make modifications as required. Turn this practice into a yearly ritual, checking your policy limits, confirming that your coverage is still sufficient, and ensuring that you’re not letting your benefits be stripped in exchange for the upkeep of the same premiums.
Amplify contributions to your IRA or 401(k)
If you contribute to a tax-favored retirement account, including an IRA or a 401(k), including an IRA (but not an inherited IRA) or a 401(k), these funds may be safeguarded from creditors if your declare bankruptcy. You already know that it is a good idea to contribute to the 401(k) plan of your company, but note that your plan can also shield your investments from lawsuits and creditors. If a 401(k) plan is not offered by your company, acquire the same benefits by investing in an IRA.
Move your investment and rental real estate into an LLC
Real estate flippers, property investors, and landlords should all have strong liability insurance (if you own an investment property you’re probably aware of this already). But besides holding liability insurance on your property, you might want to consider moving your real estate into an LLC (or limited liability company) to safeguard your assets if something unfortunate happens.
As a property investor, there are two types of liability that should concern you: The first is an inside liability; in this case, the source of the liability is the property. For example, this includes a slip and fall where the creditor wants to seal the personal assets of an LLC member. The second is an outside liability; in this case, the creditor of an LLC owner wants to satisfy the debt of a person by seizing LLC assets.
To shield your real estate investment with an LLC, you’ll need to select an attorney who understands the laws in your state and can ensure your LLC protects you from both forms of liability.
You’ve put in a lot of effort in accumulating your assets! Don’t let an unexpected event or a lawsuit sweep them away. Call our asset protection specialist today, and we’ll work in collaboration to create an asset protection plan that serves you and your family in the best way possible.