Asset Protection – It’s not only for the Ultra Wealthy

There is growing misconception that asset protection and planning is a preserve only for the multi-rich people with vast offshore bank accounts. Well, that couldn’t be further from the truth because there is no wealth threshold for how much one needs to have or earn in order to protect their assets. As such, just about anybody can protect their assets because as you age, it becomes increasingly important that you protect your assets for your next generation.

It is not what you earn that matters but what you keep. This usually applies to the impact taxes can have on your income and investments. Other potential liabilities such as credit claims, lawsuits and divorce settlements can equally be harmful to your personal wealth, often worse than taxes.

Considering the current difficult economic times, you should be concerned about protecting and preserving your personal wealth to caution yourself from unforeseen financial crises. In the current economic situation, the threat of your creditors taking over your assets is real and more frightening than ever before. Most importantly, it transcends all levels of personal wealth, from the super rich to the middle-class and even the poor.

Having a comprehensive and practical asset protection plan is important for many different reasons, and for different  people united together to achieve a common goal: to keep their assets to themselves and their beneficiaries.  Make no mistake by failing to protect your assets thinking that it is only for the rich

Since the turn of the century, the significance of asset protection to individuals has gained momentum. In a nutshell, a good asset protection plan is only effective if it reflects your current circumstances and those of your family. A good plan must always evolve considering that new assets are always added and others divested and new debts are assumed and other obligations settled.

There are many strategies you can consider to protect your assets, most of which come with tax benefits. This way, you can achieve tax savings while also protecting what you have worked so hard to accumulate. Outlined below are some of the things you can use.

Use holding companies

Many people have accumulated assets because of private business ownership. More often than not, a business represents the most significant asset to any family. In this respect, you should get concerned if you have been accumulating assets and cash inside the operating company considering that those assets are constantly exposed to creditors of the company. The best thing to do therefore is to use a holding company that would hold shares in the operating company. This way, redundant assets and cash will be paid up to the holding company in terms of dividends without tax. This is beneficial because it gives you the chance to separate those assets from the operating business.

If the business needs capital injection, the holding company will be able to lend it on a secured basis. A holding company can also enable you to save on taxation by allowing you to make other investments with the extra cash that you have accumulated. In the absence of the holding company, you may be forced to pay yourself first, pay income tax, and then reinvest what is left over.

Use discretionary trusts

A trust allows you to separate your assets from the legal ownership of the assets. If you are a trust beneficiary, you can benefit from using trust assets, meaning that a creditor of the beneficiary is not able to place a claim on the assets of the trust if a trust agreement is drafted well. Make sure that it (the trust) is irrevocable and that the beneficiaries have no rights vested in the assets. If this is not done, you may give creditors a leeway to gain access to parts of the assets. It is equally important that you draft the trust agreements to bar an insolvent beneficiary from making any distribution. Trusts are also beneficial in terms of taxation because they give you the ability to split income with other family members.

Place your assets in appropriate names

It is a good idea to place your assets in the name of your spouse, children or any other family member who is less likely to face creditor claims. If you are a business owner, for example, it is advisable that you register the family home in the name of your spouse. Before you move title to your assets, keep in mind than transferring the title to anyone other than your spouse will be considered a deposition which might trigger taxation. Also keep in mind that by giving up title assets, you may be giving up control of the asset.

Asset protection is not a preserve for the wealthy; it is a key consideration for anyone who wishes to achieve financial freedom.

Use your IRA / 401K

You can even use your IRA / 401K to own and hold rare strategic metals and other asset protection tools either onshore or internationally. We have a simple step by step guide you can download free by clicking here.