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Smart Ways to Build a Moat Around Your Wealth

Smart Ways to Build a Moat Around Your Wealth

Once upon a time, and perhaps at a few remaining historical places, huge stately castles are protected by moats and drawbridges, providing a barrier against unwanted intruders. Today’s kings and queens also need protection — just a little differently. Have you taken steps to build a moat around the assets you have worked so hard to build?

Chances are, you know someone who has been sued. Maybe that someone is you. The fact is successful people are potential magnets for lawsuits — which, even though they may be frivolous and unfounded — can wreak havoc on your financial health.

Did you know that only about a quarter of successful business owners have an asset protection plan? Today, I want to discuss four ways you can protect your assets.

Four Asset Protection Tips

Asset Protection Step #1: Get Protected Before Any Claims Arise

Step one is to get protected before any claims can be made against you. You CAN do a lot to protect your wealth before liability arises — but thanks to a concept known as “fraudulent conveyance,” you can do very little after a claim has been brought. Just like insurance, the time to have asset protection in place is well before you need it — or even think you might need it.

Asset Protection Step #2: Cover the Basics

<pStep two is to make sure you cover the basics. The fastest, easiest — and cheapest — move you can make is to take out a large umbrella policy to safeguard your assets. Another simple but powerful strategy is to place your assets in someone else’s name, such as your spouse. If you’re sued, those spouse-controlled assets are often untouchable.

Asset Protection Step #3: Consider Advanced Strategies

Next, we move on to advanced asset protection strategies. Successful business owners often take sophisticated measures to protect their wealth once they have covered the basics. A few options to consider include:

Equity stripping

Some business owners protect their assets by using bank loans to strip out the equity in their businesses, securing the loan with real estate or other assets. For creditors to get to the encumbered assets, they would first have to pay off the bank loan.

Captive insurance companies

This closely held insurance company is set up to insure the risks of the parent company, and the owner of the parent company wholly owns the captive insurance company, giving the business owner control over underwriting, claims, and much more.

Asset Protection Step #4: Avoid Big Mistakes

And the last piece of advice for setting up asset protection may seem obvious, but you want to avoid big mistakes that will trip up your protection efforts. Many of these strategies are complex. If they are poorly structured, your asset protection will have no “teeth” when they are needed most — and your assets may not be as safe as you assume. So, you want to make sure your attorney and other professionals are qualified to help you protect your assets.

Hopefully, you can see why you need asset protection and are inspired to set it up or evaluate the protection you have. It is worth the effort to build that moat and make it harder for litigators, creditors, or others to cross your protective barriers. With a little effort and the right counsel, you can take steps to protect the assets you’ve worked so hard to build.

Chris Zeches is a Certified Financial Planner® and Managing Partner at Zeches Wealth Management. Zeches Wealth Management has one singular focus: To financial planning and tax expertise to help multi-generational families and business owners achieve more of what they love.

Have A Question?

If you have questions that are specific to your family’s situation, feel free to contact us and we will do what we can to help.