Protecting Your Assets
Have you ever wondered what would happen to your assets if you
were sued, in a car accident and it was your fault or if you
became disabled or even died? Most people consider this question
but do very little about taking the necessary steps to protect
their assets.
The first thing to do is to have a plan in place before anything
bad happens to you. Even if you are one of the luck ones and
nothing ever bad happens, eventually as a fact, everyone dies.
When you die, your bank accounts are frozen, and an executor is
appointed to wrap up your estate. This means finding everyone
you owed money to, and settling the debts. If you have a family,
and all your assets are in your own name, your spouse could be
unable to access your funds for up to 2 years.
There are three major concerns when it comes to protecting your
assets: estate duties, income taxes, and lawsuits.
Estate duties When you die, the government claims a percentage
of the value of your estate. This amount varies from country to
country, and it could be anything from 20% to as much as 55%.
The solution to the estate duty problem is to ensure that your
estate is worth as little as possible when you die. Moving your
assets into a living trust could be a good solution, as the
trust is not taxed upon your death.
Income tax How do you legally reduce your tax liability? One way
is to decrease your income to an absolute minimum. Anything you
need could be paid for by a business. For instance, if you need
a new laptop, it could be paid for by your corporation or living
trust. It is a legitimate business expense, as long as you use
it for generating income, and not just for playing games.
The expenses of a business are deducted from its income before
taxes are calculated. For individuals working for an employer,
taxes are deducted before you even get your paycheck. That means
that your personal expenses are paid for with after-tax income.
If a separate legal entity can pay some of these expenses, it
reduces the amount of money you need to earn, and the amount of
tax you need to pay.
Lawsuits The first thing that happens when someone wants to sue
you is that his or her lawyer will try to find out what you are
worth.
It is not difficult to find out someone's net worth by examining
public records. These days, on the internet, it is even easier.
What you need to do is look like a poor target. This could mean
transferring as many assets as possible into a separate legal
entity, which you do not own, but do control. This could be a
living trust, or a corporation.
It might also mean that you ensure that properties in your own
name are mortgaged to the hilt, so that your net asset value
(the difference between what you own and what you owe) is as low
as possible. Ideally, you want your assets and your income to be
as small as possible, so that you are not worth suing you.
In conclusion Everyone has different financial needs. Laws are
different from country to country, and from state to state. It
is essential that you get professional advice from a competent
financial advisor before doing anything.
If you are in financial trouble, it is already too late. If you
transfer assets in order to put them out of reach of your
creditors, it may be seen as fraudulent and illegal. You need to
have a plan in place before you are sued, and before anyone
tries to take your assets away.
You may think that you are too young to worry about asset
protection, but it is not too early to get a plan in place. It
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