Asset Protection Strategies
Do you have strategies in place to protect your assets? If not, you could be risking all for which you have worked so hard. Asset protection strategies are not only important to you, but to your loved ones as well. Most asset protection tactics relate to the lawful techniques that will protect your assets from future creditors or liabilities.
In short, asset protection should be your plan for shielding your assets from liability. The asset protection strategies you employ will, of course, depend on your current financial situation and the amount of your assets, but generally, asset protection includes the following areas:
- Insurance – Insurance is undoubtedly one of the most important asset protection strategies you can have. Comprehensive insurance policies will protect both yourself and your family from financial loss if you are injured and cannot earn an income, if your home is destroyed, if you are in a car accident, or if you die.
Although many individuals worry about being over-insured, the fact of the matter is that you are likely underinsured, which could lead to financial ruin and the bleeding of your assets. Before you buy insurance of any type, consider what would happen if you were to get sick or die. How would your family cover the mortgage payment, your debts and your medical or funeral bills? If you don’t have the money to cover these costs for an extended period of time, then it is time to reevaluate your insurance needs with a qualified insurance agent.
- Wills/Living Trusts – Do you have your wishes spelled out clearly in the event of your death? If they aren’t in the form of a will or living trust, then they will unlikely stand up in court. A will or living trust is essentially a document that explains, in detail, how you want your property distributed on your death. A will is a simple document that costs little to draft, although it is often subject to probate. In contrast, a living trust, although more expensive to create, will allow the process of asset distribution to be more streamlined. If you have no document explaining your wishes, then it is up to the court to decide where you money and property will go once you die.
- Financial Power of Attorney – A financial power of attorney is a legal document that allows you appoint an agent to handle your financial affairs if you become unable to do so. Your agent will be someone you trust and should be someone who can adequately handle your financial affairs. Without a power of attorney, you may be leaving yourself open to financial problems. Out of all the asset protection strategies, a financial power of attorney is often the least thought about, although it is, in fact, it is very important.
Your financial power of attorney can perform a number of financial transactions on your behalf, including: handling your banking transactions, buying and selling property, entering into contracts, filing tax returns, maintaining and operating business interests, and making financial gifts, among other things.
Regardless of the types of assets you own, it is important that you protect them for both yourself and your family.
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