Image by Reimund Bertrams from Pixabay
You’ve probably seen the term around.
And if you are like most business owners and leaders I work with it probably conjures up two thoughts: complex or illegal.
The truth is it shouldn’t be either in most cases. Sure in some cases asset protection can get complex. But for most business owners that shouldn’t be the case. At lot of asset protection can be done simply.
In some cases folks do do illegal things with their asset protection. But that can – and should – be avoided in all cases.
So let’s look behind the fold at this mysterious area and how understanding the basics of asset protection might make you a better business owner or leader.
Lesson 1: Asset Protection Is Legal When Done Right
Asset protection, done right, is not only legal – it’s common. You probably come in touch with various forms of asset protection every single day.
What are some ways that us, everyday people, encounter asset protection?
Corporations and limited liability companies are a form of asset protection. We probably work for and/or transact business with business entities every single day.
Insurance is another form of asset protection. And I am hoping you have it on your car (if you own one) and home.
Trusts are a little more advanced version of asset protection but many business and families use them too.
The fact is there are many different asset protection strategies which are not only legal but, in fact, common. So you can shed any worry that protecting your assets is illegal or morally wrong.
Lesson 2: Many Effective Asset Protection Strategies Are Simple
As we learned in Lesson 1 there are many common asset protection strategies. And many of them are them are common.
Controlling the ownership of assets, insuring assets and using limited liability entities are all very simple.
A lot of effectiveness of asset protection can be done very simply. The only complexity comes from knowing what strategies to use when and how to combine strategies together.
Lesson 3: The Devil Is In The Details
The tough news is that while asset protection is often simple the details become really important. Many asset protection strategies fall apart when the details don’t fit together.
For instance, when trusts are deployed the assets need to be titled to the trust. You’d be surprised how many asset protection systems fail because the assets to be protected simply weren’t put into the trust.
Meanwhile, sometimes the wrong assets are put into the trust. In most cases transferring a car to a trust would be a big no because the car can bring liability with it. If that car gets into an accident the trust assets will be exposed.
So while asset protection can be simple the details need to be worked out. Whenever a potential liability is located it should be isolated through some legal strategy. Never forget the details in asset protection.
Lesson 4: Ownership and Control Are Key
As you get deeper into asset protection one thing becomes clear: at the end of all the day ownership and control of assets are key.
If you no longer own an asset it’s hard for someone to get to it. But, generally, most people don’t want to give up all of their assets.
What we generally see is that most business owners want to keep control. And this can kill asset protection.
So think carefully how ownership and control works in your asset protection plan. And stay focused on making sure everything that is done is consistent with that ownership and control.
Lesson 5: Costs Go Up As You Add Complexity
For many people asset protection conjures up visions of offshore trusts, hidden bank accounts and codes and passwords. Some of that is fact and some of that is fiction.
But while most asset protection is simple layers of complexity can be added as assets and needs get larger. But as complexity goes up so does the cost.
Forming a simple LLC is cheap. Insurance is cheap. Offshore trusts are expensive.
So anyone thinking about asset protection should know 80% of protection can be bought for 20% of the cost. While there is no such thing as a 100% guaranteed asset protection strategy the more advanced techniques cost more and more money.
While good asset protection should be part of a larger plan we also know Rome wasn’t built in a day. You don’t have to do it all at once.
Some parts of asset plans have to be done in larger coordinated efforts – like funding trusts and moving assets into them. But other pieces of asset protection planning can be done in pieces that can be connected later – like setting up an LLC or buying insurance.
Coordinate Your Efforts
In this article we’ve mentioned some of the most basic asset protection techniques. A good asset protection plan won’t be just a bunch of individual pieces but rather a coordinated whole. So think about what the big picture looks like and how all the pieces fit together.
Preview of Asset Protection 201
If you want a preview of Asset Protection 201 here it is: planning. Particularly planning based on jurisdictions of choice. For instance, the two primary states I work in Florida (I keep an office in DeLand, Florida – between Orlando and Daytona) and Texas (I keep an office in Dallas) are great states for asset protection. Both have very generous provisions for protecting the equity in your home.
The step beyond the selection of the best domestic jurisdictions is using foreign jurisdictions to protect assets. The Cook Islands, Nevis and the Cayman Islands can all add a nice piece to asset protection but must be planned very carefully.
DISCLAIMER: This article talks generally around some legal issues. I am a lawyer licensed in multiple US jurisdictions, but I am not your lawyer unless we have signed an engagement agreement. Please view this material as educational and consult counsel you have retained for advice on your specific facts and circumstances. Do not rely on these general statements as legal advice.
By: The Our Shawn McBride, is the business nerd and long-time business attorney that focuses on changes of ownership in businesses. He works with business owners that know their business is about more than themselves to get ready for their future within the future of business through keynotes, training and personalized solutions. In furtherance of this he hosts The Future Done Right(TM) Show where he collects, digests and gives lessons and insights on The Future of Business. If you want regular content on the future of business subscribe to get new blog posts from us here.
You’ll quickly notice his unusual suits which he uses open the conversation of how businesses should Do Business Differently™.
The Our Shawn is based in DeLand, Florida (between Orlando, Florida and Daytona Beach, Florida) and Dallas, Texas where he keeps offices. You can also find Shawn on webinars or traveling nationally or internationally for speaking engagements.
Check me out at: www.planningdoneright.com
Do you really want to make plans that work?
Future Done Right™ YouTube Channel – Check out this YouTube Channel for interviews and discussions about the future of business.
FREE preview copy of Business Blunders! – This is my first book and it looks at common business mistakes that I’ve seen in my years of working with business owners. This will allow you to avoid those issues in your business!
And a Little Thank You?
If you like this article can you leave a clap for it on Medium.com?