Through hard work, smart budgeting, and savvy investing, you have been accumulating wealth with the goal of becoming financially independent. You can relax now, right? Actually, the next step is likely the most crucial one you will take, because the better off you become, the more devastating a lawsuit can be to your future. Protecting your wealth is as important as the steps you take to build it.
As your level of income and total net worth increases, the level of risk of being the target of a lawsuit increases as well. Everyone is at risk for being sued in the United States as the number of lawsuits introduced every year is climbing, but high net worth individuals stand to lose much more than the average person. implementing asset protection strategies in your overall estate plan can help minimize your exposure to such an event.
In order to formulate asset protection strategies, you need to familiarize yourself with the basics: how common asset types are affected by a judgement against you. Residents of California can take advantage of the following techniques for protecting assets from creditors.
- Some retirement accounts, such as IRAs, are protected and others, such as 401Ks and profit-sharing plans, are not. Contributing the maximum amount into your IRA can be a good part of an asset protection plan.
- Mortgages provide protections against claims because the equity in your home is not considered an asset that can be collected by creditors.
- Umbrella insurance protects you from paying the portion of a liability judgement that is over the amount your homeowners or auto insurance covers.
In addition to these examples, higher income individuals will need to utilize specialized asset protection strategies due to the complex nature and size of their financial holdings.
If you fall into this category, protecting your asset protection plan is elevated, because you are at risk of frivolous lawsuits brought by those seeking a big payout. Waiting until you are being sued to put these protections in place is a reactive strategy with little chance of success. Proactive planning is the best way to ensure wealth preservation.
Here at Jeffrey M. Verdon Law Group, we specialize in working with high net worth individuals. We offer comprehensive estate planning services, which include both risk assessment and nuanced asset protection. Set up an appointment to discuss your estate plan with one of our professionals.