Ten Reasons You Need Asset Protection

Successful business and investment planning should encompass protecting your assets.

In our litigious society, protecting yourself, your business, and your other holdings is a necessity. Especially since a single mishap or mistake has the potential to wipe you out. Our team of business accountants has laid out the top reasons to protect your assets below.

To keep your holdings secure, financial advisors recommend using asset protection. It can be the difference between weathering the storm and closing your business. There are a few types of asset protection. However, not all types work in every situation.

What is Asset Protection?

Asset protection is enacting strategies to safeguard money, holdings, and other assets from seizure by creditors. The method limits what can be taken in case of a judgement against you.

Why is Asset Protection Important?

No matter how careful you and your employees are, accidents happen, and honest mistakes occur every day. Often, a single mishap can lead to an avalanche of trouble. If you own a business, you are at risk of losing not only company-related assets but also personal holdings in the event of an unforeseen circumstance.

For example, Jay owns a catering business as well as his house and investment property. An employee driving the company van causes a car accident, and the victims sue Jay for damages. As a result of the lawsuit, Jay cannot pay his suppliers. The supplier’s levy charges against Jay for their money. If Jay cannot pay the court-ordered amount, the suppliers can take Jay’s business assets as well as his ones.

Several unexpected events can lead to this sort of situation, including:

  • Creditor claims
  • Workplace accidents
  • Lawsuits
  • Insolvency
  • Relationship breakdowns.

If you have asset protection, your assets are safe and cannot be seized as a part of a legal settlement.

Ten Reasons You Must Have Asset Protection Accounting

1. Your accountant can help determine what your assets are. It is easy to think about significant assets like homes, vehicles, and jewellery. However, your accountant knows how to find your assets and divide your holdings from a business.

2. You are working with professionals who understand the system. Sometimes, a situation seems manageable until we are knee-deep in it. With asset protection, you may believe you know what is necessary and learn the important details later. An accounting professional specialising in asset protection would know the best way to keep your holdings.

3. An accountant with experience in the field will be able to set up an asset protection trust. If there is a chance that creditors may come after you at some point, this is an intelligent way to guard what is yours. The question often comes up, “How are my assets protected in a trust?” The assets held by a trust are owned separately by the individuals who own them.

Separating your assets from those of your business allows you to protect your wealth from future creditors. Doing so means you can pass your property on to your loved ones after you die.

4. Your accountant may advise you to take out one or more insurance policies. The right type of insurance can offer the protection you need. Specifically, policies such as,

    • Professional indemnity insurance
    • Worker’s compensation insurance
    • Public liability insurance

In many situations, these policies can help you keep what is yours. However, they cannot offer protection for most matters outside the business, such as divorce. Be sure to speak with your accountant to clarify the details of what is covered and what is not.

5. A legacy can be protected with the right will. Your accountant knows how to use your will as an asset protection tool. You will have peace of mind knowing that your legacy will live on, and your family will have financial security.

With a strategy in place, you can focus on growing your wealth and not be concerned about its potential exposure to unexpected events.

6. Your accountant may recommend setting up a company to separate your business and personal assets. A company is a separate legal entity from its owners and managers. So, if your company is sued, your assets are safe.

7. Situations that may seem unresolvable can be sorted by an accountant with experience dealing with the matter. This is useful if you are on the fence about a decision regarding asset protection, such as choosing a trust or restructuring as a company.

8. An accountant can find tax deductions related to your asset protection. Business owners are often unaware that expenses related to asset protection can be tax deductible. Just as your accountant finds other deductions, they will sort out what can and cannot be deducted.

9. Your accountant can guide you from unwise practices such as building wealth in your name. While this has been a traditional practice for decades, in today’s society, the bigger your name, the more of a target you have on your back. Staying low-key about your assets is a straightforward way to help protect them.

10. Dividing your assets can be easier under the advice of an accountant. Some spouses balk at the prospect of prenuptial agreements and separate accounts. Unfortunately, given divorce statistics, it is a practical way to protect the assets you brought to the marriage.

Operating a business guarantees that your plate is full to overflowing, so your time is limited. This is where M2 Corporate can help. Our experts can take care of numerous aspects of your business, including carefully creating an asset protection strategy. You might consider conferring with one of our professionals. You can find out the best system for protecting your wealth.

Mace Turco

Mace Turco

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Mace has always had a passion for business, and he loves working with clients who are driven and have ambitious business goals. His qualifications include an AIPA from the Institute of Public Accountants and a Bachelor of Commerce from The University of Western Australia for Corporate Finance and Financial Accounting. In 2020 Mace was awarded the 30under30 Award in the Business Advisory Category, a National Award hosted by Accountants Daily.