In a recent interview I revealed 3 big misconceptions that leave people exposed to financial loss.
Ensuring that you have a robust plan that sidesteps widespread incorrect asset protection notions is the best way to shield your accumulated assets and wealth.
One of the most common asset protection misconceptions is that insurance can be used as a cure-all to protect wealth.
What most people don’t realize is that insurance is only one part of an asset protection plan, which also includes smart contracts and legal entities. While securing solid insurance protection is a must, remember that insurance companies are out to make a profit and will try to use any means necessary to avoid a payout.
One of these means is exclusions written into insurance contracts that set limits on when the insurance company is responsible when something goes awry.
Another commonly held belief is that an asset protection plan can be arranged at a later date.
Many people put setting up an asset protection plan on the back burner – often until it’s too late. This can be particularly detrimental to someone who waits until after a lawsuit has been filed against them. Laws in place make it illegal to transfer assets after legal action has been taken against someone.
The best thing to do is to get in touch with a professional long before a lawsuit comes along, as having a thorough protection strategy in place could help save thousands – even millions – in the case of a lawsuit.
Another prevalent misconception is that assets are protected via a legal entity, such as LLCs, trusts, and corporations.
Forming legal entities come with their own set of rules that, if broken, could mean a world of trouble in the case of a lawsuit. For instance, if you’ve formed an LLC, then you need to ensure that you keep business and personal transactions separate.
During a lawsuit, if the other side can prove that you billed personal expenses to a business account, then this will expose your assets to the person filing the suit.