Perhaps there isn’t a more devastating financial loss for anyone than working all their life only to face an economic crisis resulting in bankruptcies, business reversals, and defaults on loans.
Moreover, unexpected lawsuits could threaten the very things you’ve worked for throughout your life. So, please do not wait around for creditors to take over your estate; it would be wise to prepare ahead and create an asset protection strategy.
While there are numerous methods you can use to safeguard your assets, here are six effective strategies to consider.
Retirement Policies
One of the most reliable methods to safeguard a large part of your savings and assets is to put them into qualified retirement plans.
The savings and funds enrolled within a company-sponsored plan are sufficiently protected against any uncertainties. It doesn’t matter if the plan is covered under or governed by the Employee Pension Income Security Act (ERISA); the savings aren’t subject to the scrutiny of bankruptcy procedures.
The plans that fall under this asset protection are
- Defined-contribution plans,
- Government plans
- Defined-benefit plans and
- Savings Incentive Match Plan for Employees (SIMPLE) IRA,
- Simplified Employee Pension (SEP) IRA, and
- Church plans
Note that you’re only allowed to contribute USD 1 million in limits on the regular IRA investments to your SEP-IRA.
Protect Your Assets Through Embedded Insurance
For a long time, the insurance industry was all about long processes and tedious paperwork. However, that is changing for good.
With the inclusion of AI and Machine Learning, insurers can allow various policy carriers to offer customized insurance coverage to the customer with just a few clicks.
You can use this insurance technology to safeguard any new asset (like a car or a new property) you plan to lease or buy. Everything is simple and customized for you, so this sounds like the easiest as well as the safest option to consider!
Life Insurance and Annuities
Another option to safeguard your savings and assets is to put a portion of your savings in life insurance and annuities.
Remember that the law of each state governs annuities and life insurance, as well as the amount of protection applicable. In certain states, the sum insured is the total cash surrender value for a life insurance policy and the proceeds of annuities.
This sum insured value is out of bounds of garnishment, attachment, or other legal processes that creditors could use against you to take your money.
Homesteads
If you own residential properties, you can secure them by leveraging the benefits of homesteads law.
Homestead protection ensures that if something unfortunate occurs to you, the creditors cannot pursue your residential properties, which are considered part of your homestead.
The rules also differ from state to state. Some states offer a complete protection amount for your homestead. Other states, however, offer only a limited amount of protection. There are also a handful of states with no protection for homesteads at all.
Irrevocable Trusts
Another option to secure your wealth is by establishing an irrevocable trust. The trust must be irrevocable. If you transfer your assets and wealth into such a trust, it becomes responsible for the transferred assets. You can no longer control how your transferred assets will be managed or distributed.
The law here removes the right to own the assets that you transferred. Since you’re no longer the legal owner, these assets are out of the reach of creditors who might decide to pursue them.
Final Word
The majority of people work throughout their lives to build wealth and accumulate assets that they can use for retirement or leave for their heirs. However, often they fail to formulate an asset protection plan to safeguard their assets from creditors or other individuals looking to take their money.
To ensure the security of your assets, we’d recommend keeping the above tips in mind. Make sure you do not lose your hard-earned money in case of an unfortunate event.
