Being able to protect your assets is as important as protecting your wealth. After all, your assets are what makes your wealth, and the more you have, the more you need to protect. There are certain ways to protect your assets and ensure your wealth to avoid unnecessary lawsuits, especially after a sudden wealth event. These wealth events can influence stock options sales, selling off a business, inheritance, and more.
Here are four strategies/ways how you can protect your assets and wealth –
Formalise all the informal partnerships
Whether you are in a partnership with a family member or are relying on word-of-mouth with your best friend, nothing should remain informal in a formal association. In a business, you are always responsible for your partner’s actions, so you might as well formalise it. Let’s take the example of your friend and you in an informal agreement to provide consultancy services. If your partner gets hit by a truck on the way to your client, your personal assets could be in dire jeopardy. Hence, it is always recommended to formalise partnerships and have everything agreed upon and sorted in writing.
Keep your assets separate as much as you can. It is good to have joint accounts, but having money and assets in more than one name immediately divides this in half. In most cases, this is not a problem, but for some, it could be. For example, you hold all your accounts as a joint account with your spouse and deposit all your earnings into it. If things do not work in your favour and your spouse ends up filing for a divorce, half of the money will automatically be theirs. To avoid such complications, it is advised to keep your accounts and assets as separate as possible.
Expand your liability insurance
Liability insurance protects you against the risks that come with liabilities due to lawsuits and other claims. It protects you if you are sued for claims within the insurance policy coverage and will save you a lot of money. This also acts as your first line of defence in case of litigation. Increase your liability limits by calling your insurance broker and ensure that that the liability coverage is at least equal to your net worth.
Shield your assets by creating business entities
If you are a small business owner or work part-time, you work as a sole proprietor without incorporating a formal business. This brings all your personal assets at risk if you get sued. It is always advised that you create proper business entities as a corporation or LLC to shield your personal assets from lawsuits that could be drawn against your company.
4 Tips to protect and grow your wealth
1. Customise your strategy the way you feel most comfortable: Wealth protection strategies are not the same for all. They should be customised to align with your values, goals, risk tolerance, and current situation. Always ensure that you follow strategies that fit best with you and not plainly what is mentioned on the internet from a general point of view. What may work for some may not work for you.
2. Know your risk appetite: You should always be aware of your wealth and how much you are ready to lose. This is where liability insurance comes into play, and you decide how much you want to be insured. It is also best advised to use appropriate tools to understand your risk tolerance and then make a plan to protect your wealth.
3. Follow diversification: Always diversify your wealth into different investment arenas. The higher you diversify, the more your wealth is protected. When you invest in a single investment type, you are at a higher risk. This is because if the investment fails, your money is gone. Spread your investment in different arenas carefully and reduce your dependency on a single investment type.
4. Always go back and review your strategies: An excellent financial planner never ‘sets and forgets’. A good financial planner always goes back from time to time to analyse how their wealth protection strategy is working out and make amendments if needed. It is best advised to review the wealth management and protection plans once a year.
Conclusion
As we have discussed how you can protect your assets and wealth and the tips to do it wisely, we aim to make you aware that no property or money is ever one hundred per cent safe. Your assets are your most prized possessions, and hence it is essential that you take every necessary action to protect them against harm, fraudulent practices and lawsuits.
