7 Strategies for Protecting Your Wealth
Wealth preservation is all about ascertaining that you can pass on as much of your assets and earnings to the next generation. There are multiple strategies you can apply to insulate your wealth for your loved ones’ sake while guaranteeing your financial security. The following are seven strategies for protecting your wealth.
Hire an asset protection lawyer
68% of United States residents die intestate, causing significant legal and financial issues for the loved ones left behind. An asset protection attorney helps develop a strategy you can implement to safeguard your assets. They create a plan that shields your assets from lawsuits, creditors, and any future claims. Asset protection lawyers are familiar with asset protection laws such as property rights, probate, wills, taxes, and trusts. This knowledge enables them to implement the best protection plans to shield your properties and assets.
When looking for an asset protection lawyer, ensure they have experience handling asset protection matters and that their portfolio is impressive. Consider visiting blakeharrislaw.com or any other relevant site for legal asset protection assistance.
Leverage an asset protection trust
An asset protection trust is an instrument that holds your assets to insulate them from creditors. It offers the most robust shield from lawsuits, creditors, and court judgments against your wealth. An asset protection trust (APT) deters expensive litigations before they start or ensures favourable settlement negotiation outcomes. There are two types of irrevocable trusts you can use as asset protection instruments:
- Foreign APTs: Also known as offshore, these trusts are usually held in offshore accounts. The trusts are created in jurisdictions outside America. While they're costlier than domestic APTs, foreign APTs’ privacy measures are more stringent than their American counterparts. As such, the safeguard they offer your assets is more effective
- Domestic ATPs: The trust laws relating to these trusts are the most flexible in the U.S. Before setting up your domestic asset protection trust, look for states that allow them. Since domestic ATPs are relatively new and lack demonstrated case law credibility, which can be detrimental if there's a judgement or lawsuit against your wealth
Insurance is a vital wealth preservation component you should include in your asset protection plan. When faced with sudden disability, illness, or death, insurance enables you to cover the resulting ongoing life expenses. You can leverage various insurance policies to lower the effect of negative situations on yourself, loved ones, and long-term financial objectives. They include:
- Long-term care insurance: It's a policy that covers home health and nursing-home care for older adults or those with disabling or chronic conditions that require constant supervision. This keeps you from depleting your assets to cater to your long-term care needs
- Life insurance: This coverage insulates your loved ones’ financial security by offering them tax-free payments once you die. Before buying this policy, consider the living standards you want your loved ones to have when you’re no longer there to support them and your financial situation
- Disability coverage: It's a policy that offers wealth preservation in case you're disabled and can't continue working. It safeguards your wealth by replacing a part of your income when you can no longer work, cover living costs, pay bills, and maintain your living standards while you recuperate. Disability insurance also shields your future earning potential keeping you financially independent
- Health insurance: Obtaining health insurance shields the assets and earnings you’ve accumulated over time when you fall critically ill. With this coverage, you can access the best medical care without squandering your wealth
Establish an emergency fund
Setting aside funds for sudden or unexpected expenses or future spending is a perfect way to manage unplanned needs and daily cash flow. This ascertains you don’t prematurely take funds out of your retirement accounts or certificates of deposit. The emergency fund you create acts as a safety net in challenging times.
Develop a debt management plan
A great debt management plan aimed at protecting your wealth prioritises debts secured against your assets. This lets you clear these debts first, minimising the possibility of compromising or risking your assets. With a debt management plan in place, you can keep creditors from having automatic claims against your assets or property. Since a debt management plan is goodwill-based, you should keep with repayments to ensure creditors don't seek legal assistance to claim your assets and earnings.
Concentrating your investment in one asset class or industry is very risky. Diversification spreads your investments across various asset classes, market sectors, and geographic locations. This restricts exposure to one particular area, reducing risks.
Create a financial plan
A financial plan summarises your objectives and the techniques to help you achieve them. A certified financial planner can come up with a suitable financial plan depending on your financial condition plus long-term and short-term goals. The plan may include education savings, pension decisions, and more.
Insulating your earnings and assets helps secure the next generation’s future while letting you enjoy a comfortable lifestyle in old age or when you can longer work. Consider implementing these strategies to protect your wealth.