If you accumulated mass amounts of wealth over the course of your life, you may worry about unforeseeable events that may cause you to lose a substantial portion of it. While many people worry about poor investment decisions or volatile markets, not many worry about legal challenges, but they should. Forbes warns that lawsuits are one common way wealthy individuals lose out on their hard-earned wealth. The article also explains that with thorough estate planning, you can preserve your assets should legal challenges arise during your lifetime.
One way you can protect your assets is by retitling them. Doing this allows you to protect your property from seizure in the event of a legal dispute. However, bear in mind that though this form of asset protection works with some assets, it may not be possible or practical for you to remove your name from all assets.
Another way you can protect your money or assets is by creating a limited liability entity, which helps you keep your personal assets separate from those of your business or other sources of income. As its name implies, a limited liability entity protects the business owner from assuming any personal liability for a business’s dealings. However, this form of protection is only effective if you keep your business and personal assets separate.
A third way to protect your wealth is via an insurance policy. Though life insurance policies help your family preserve your wealth by allowing you to transfer it tax-free to heirs upon your death, other forms of insurance can protect your wealth against many legal challenges. Some such forms of insurance include casualty, property and liability.
One of the best wealth preservation vehicles, however, is a trust. Both an asset protection trust and an irrevocable trust become the “owners” of your assets once you place them within it, which means creditors and litigants cannot lay claim to them.