Asset protection is the strategies put in place to protect your business and personal assets if something goes wrong.
During the good times and when the economy is flourishing people seldom think about potential problems or ramifications should something go wrong. By the time a negative event has occurred it is frequently too late to avoid loss of assets. The level of risk to assets is largely dependent upon the nature of activities that someone undertakes and is involved in.
It is a myth that only the rich and wealthy benefit from asset protection. In fact many of the most effective strategies can and should be established and put in place before any major wealth is created.
Key areas for asset protection are bankruptcy, insolvency, marriage breakdown, and death.
Threats associated with carrying on a business include:
- Professional negligence in the provision of services.
- Inability to pay creditors leading to bankruptcy.
- Breach of contract.
- Inadequate insurance.
- Default on loans leading to repossession.
- Sickness or injury to a key player in the business.
- Recovery of joint loans from the asset rich borrower.
- Downturn in business conditions.
- Employee claims due to harassment or unfair dismissal.
- In ‘partnership’ structures being responsible for the action of other partners.
- In some cases personal liability for debts when acting as a company director.
Asset protection is like insurance. You hope you will never need it, but if you do you are so thankful you put it in place. To be effective asset protection strategies need to be put in place early, well before any potential problems are on the horizon.