For many people, the term “asset protection” brings to mind safes and alarm systems. Though physically protecting your valuables is important, true asset protection is much more sophisticated.
What is Asset Protection for New Jersey Residents?
So, what is asset protection? In simplest terms, “asset protection” means taking precautions to ensure that your home, retirement accounts, and other assets are insulated from liability. Once upon a time, only physicians, real estate investors, and others in high-earning, high-liability professions routinely took steps to protect their assets. While those operating businesses and owning multiple properties may face more significant risks, asset protecting planning is important for anyone who wants to ensure financial stability for himself and his family.
Asset Protection Basics
The specifics of an effective asset protection plan will vary depending on the individual’s holdings and priorities. However, some basic protections are helpful for most people. For instance:
- Carrying adequate liability insurance can help to protect critical assets such as the family home. Your specific needs will depend on your circumstances, but some core areas include automobile liability insurance, homeowner’s or renter’s insurance, and liability insurance for any business you may be operating. Though most of us hope never to have to use it, insurance coverage is not the place to cut corners.
- Creating walls between assets and sources of potential liability can help ensure that liability from one area of your life doesn’t bleed over and have a devastating impact on another. For example, operating your business as a corporation or LLC provides a layer of insulation between any liability your business might incur and your personal holdings such as real estate and brokerage accounts.
- Placing assets in trust can help to segregate assets and direct the purposes for which they may be used. While placing property in trust doesn’t automatically insulate it from creditors, strategic use of trusts can help to protect assets during your lifetime and to ensure that they benefit those you intend to protect after your death.
Asset protection can be more complex and more critical for those in certain professions or with certain types of property. Some examples include:
- Physicians: While anyone who is self-employed and has not segregated his business from his personal holdings and liabilities faces some additional risk, physicians are among those whose work involves an additional risk factor. According to a survey conducted by the American Medical Association (AMA), more than 42% of physicians have been sued, including more than 60% of those late in their careers. More than 22% have been sued more than once. Without adequate insurance and proper barriers between his professional and personal assets, a medical professional could easily lose his home and other personal assets, and even be thrown into personal debt.
- Real Estate Investors: Real property investments can be lucrative, but they can also be risky. An incident as simple as someone slipping and falling on an icy sidewalk or parking lot and sustaining a serious head injury could lead to hundreds of thousands of dollars—or even millions—in liability. If the investor owns multiple properties in his own name, or even has multiple properties housed in the same LLC, then an accident involving one property can put all of those holdings at risk.
Create Your Personalized Asset Protection Plan
Never assume that you don’t have enough assets to warrant an asset protection plan, or that your assets aren’t at risk. Even if you are at the beginning of your career and don’t have significant investments or equity in your home, remember that a judgment resulting from a car accident, injury on your property, or business-related incident can follow you for years, limiting your ability to build wealth and provide security for your family.
Take the first steps toward protecting your present and future assets today, by educating yourself about the risks you face and the options for limiting your risk. Take advantage of the knowledge offered by asset protection attorneys, financial advisers, and others who have the experience to help you protect yourself.