It’s not enough to just build wealth—you also have to protect your wealth from taxes, lawsuits, tenants, and probate.
Those who have accumulated large assets through inheritance, residual investments or a windfall profit from a business venture are always at risk and must protect their assets against lawsuits from people with malicious intent. There are certain precautionary measures that you can take in this regard. Any of your rivals may be on a look out for opportunities where he or she can file a lawsuit against you and deprive you of your assets.
Furthermore, these lawsuits do not become a cause of worry until they actually occur. You can think of an imaginary situation where a mishap occurs in your rental property to someone due to your perceived negligence and a lawyer dragging you in a lawsuit. As such, you must be prepared for any such circumstance and must shield your assets so that it does not get into somebody else's hands.
How to shield your assets
There are provisions in law that help you shield your assets. However, you also must implement all the precautionary measures to prevent your assets from being snatched away due to litigations.
Some of the steps you can take to shield your wealth are:
Increase the insurance coverage on your assets and liability: Insurance is the first line of defense to shield your assets. Your umbrella cover must be equal to your net worth. If this is not the case with you, you must call your insurance broker and ensure you are property insured.
Own Assets Jointly. This can include almost anything: real estate, vehicles, stocks, and more. A jointly owned asset is passed onto the survivor automatically.
Create one or more trusts. Assets and property within a properly drafted trust avoid the probate process. They are simply transferred to the beneficiaries of the trust. This also has the effect of providing greater protection of the assets from creditors.
Avoid informal partnerships: It is advisable that you formalize all your informal partnerships because you never know when friends turn foe and you are duped of your assets by your partner. It is better to for an LLC or corporation to limit your liability and increase privacy.
Never mix business assets with personal assets: You must not mix your personal assets and business assets because if your business for some reason runs into trouble, your personal assets are not at risk and vice versa.
By properly planning and protecting your estate with the appropriate financial and legal professionals, you can maximize the amount of your estate that passes to your family, friends, and charitable organizations. The unfortunate alternative is that more of your estate will pass to your creditors, various attorneys, and the legal system.