The 8th of March is celebrated as International Women’s Day and the celebrations go on for the entire month.
In contributing to the month-long focus on Women, we published an article titled “The Global Businesswoman and Asset Protection” in the Ladies in Business Magazine Global and will be reproducing the same in this edition of our Wealth Office Newsletter. You can also view the publication in the Ladies in Business Magazine Global HERE
The Global Businesswoman and Asset Protection
Many a time we work so hard to become comfortable and be able to afford everything we ever want or need as well as to provide for our families. This desire to thrive and excel often gives us sleepless nights, late-night work, less social life, and less time for ourselves and those we love. All in the bid to prosper and be self-sufficient, we work so hard to accumulate assets and wealth. In some cases, people lose those that are valuable to them as they go on this journey.
More often, in the journey to wealth and comfort, we often fail to realize that sometimes life happens, a fire outbreak could lead to the loss of property, then what happens next? All you have worked so hard for would be no more.
Death or incapacitation could happen, and the children or family you worked so hard to give the best life would be left with little or nothing due to either improper management, family conflict, chaos, or the greed of interlopers.
Hence, as we accumulate wealth and assets, we must ensure that there are proper asset protection structures embedded in how the assets are owned.
What is Asset Protection?
Asset Protection is the adoption of strategies to protect one’s wealth. It refers to strategies used to guard one’s wealth against seizure, judicial claims, taxation, expropriation, and other losses.
Asset and wealth protection planning is very important and without such planning, you are creating a threat to the preservation of your wealth. It is important that you plan now to reduce or eliminate adverse economic consequences from lawsuits or other claims which may arise in the future.
An asset protection plan has two goals:
a. to make an access and the enforcement of claims or judgments against protected assets difficult, if not impossible; and,
b. to allow you to plan and decide who will have the beneficial enjoyment of your assets and wealth during your lifetime and afterward.
The underlying principle of asset protection planning is the separation of asset ownership from control, there are structures that can be utilized to achieve this separation.
Implementing an asset and wealth protection plan comprises of
a. identifying the possible threats; and
b. understanding the benefits of instituting a plan in order to protect and preserve assets before a problem arises.
What could be the threats to your assets and wealth?
Listed below are some threats that can arise to your assets and wealth
- Professional liability in respect of claims brought against you.
- Personal liability in instances where you operate your business as a sole proprietor
- Breach of contract or negligence claims from persons with whom you have transacted business.
- Forced heirship claims from the executors or administrators of your spouse, children, or beneficiary’s estate.
- Political and economic instability in your country
- Expropriation of assets by aggressive government agents
- Imposition of exchange controls
Onerous government regulations
- Family provision or inheritance claims brought by a spouse, former spouse, child, or other dependents.
- Divorce or separation proceedings from a former spouse; and
- Claims in bankruptcy.
How do you protect yourself?
- Make use of business entities, avoid owning assets in personal name
- Make sure you have sufficient and adequate insurance
- Segregate assets and transfer the assets into a Trust
- Put in place an asset protection plan, some asset protection strategies are discussed below:
1. Corporations, Limited Partnerships, and Limited Liability Companies
Owners of corporations, Limited partnerships, and limited liability companies are typically protected by the government through limited liability laws, whereby individual owners are not held accountable for the business entity or organization’s debt.
2. Asset Protection Trust
An Irrevocable or foreign situs asset protection trust is a trust that holds assets protecting the assets from 3rd parties or creditors.
3. Transfer of Property Right
A person may transfer his/her legal right to an asset to their spouse, relative, or a trusted friend to protect it from creditors’ claims. This allows the debtor to possess their asset without the risk of losing it to creditors. Though, it presents a huge risk in the case of conflict between family members or friends, since they will legally own the asset.
4. An Integrated Overall Estate Plan
It is optimal when you have significant assets and wealth to adopt a coordinated, integrated approach to protect your assets during your life, hence a long-term estate plan should be considered. Setting up an estate plan is important, this enables you to maximize the wealth protection and benefit of your assets during your lifetime as well as maximize the assets you ultimately can transfer after your death.
When done the right way, the implementation of an integrated asset protection and estate plan strategy looks beyond traditional post-mortem planning. It looks at how you manage your assets today, and how that management can be structured and coordinated to maximize ease of use and flexibility in the event of unforeseen events as well as to minimize estate taxes that may fall due.
a. Plan your asset protection ahead of time! Set up your plan well before you would need it.
b. Separate your personal assets from business assets.
c. Avoid sole proprietor as it puts you at risk of losing your assets, as it is easy to seize property that is under your name.
d. Ensure that your business assets are safe in a business entity.
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