Asset Protection For The Middle Class?
Posted By Ike Devji on March 4, 2010
You Bet!
As an Asset Protection lawyer that works with high net worth clients nationwide I have a large variety of the most sophisticated legal and financial tools at my disposal to help protect my clients. When Norb Vonnegut asked me for an Asset Protection primer and wealth tools that apply to everyone for Acrimoney, I went back to basics.
- Do Something TODAY. Every day that passes makes transfer, tools and actions you take to protect yourself stronger and harder to argue with. Trying to protect yourself after you have a liability event is rarely effective and usually illegal;
- Liability Insurance is your first line of defense, buy every dollar you can afford, including umbrella policies, assume it won’t work and have a back up plan;
- Use corporate entities like LLCs as liability firewalls. Always divide and segregate your personal & business assets (and liabilities) as much as possible. “Sole Proprietor” is almost always the worst choice;
- Don’t assume that a corporate entity on its own is complete protection. Remember that single member or “closely held” entities are subject to “piercing of the corporate veil”. If you own it, run it, control it, it can be argued that it is still YOU;
- Get professional legal & accounting help to organize your assets and make sure you maintain the legal formalities of these entities like tax returns, meeting minutes and separate bank accounts or they won’t help at all;
- Get your vehicles out of the name of your business. Many people do this for the deduction. If you or your spouse injures someone with your car you have created a “bridge” to your business and all it owns. Take a vehicle allowance instead;
- If you have employees get professional employment manuals, policies and dispute resolution agreements in place. A small investment will cover your business and family for years. You are five times likely to be sued by an employee than anyone else;
- Be nice to everyone as a rule. During difficult economic times people are much more likely to take legal action, whether justified or not. Your bedside manner will play a role in their emotional decision to sue you;
- Don’t keep too many eggs in one basket. Don’t use a single LLC, for instance, to own separate assets like 3 different rental income properties with high equity. An injury or exposure at one property or business places the owner, the LLC and all that it owns, at risk;
- Own Nothing, Control Everything. You don’t need to keep assets in your own name to use, control and enjoy them. Make use of trusts, corporate shells and the LAW to transfer title to assets away from you.
