Learning about asset protection for professionals can ensure that individuals do not lose their assets to bankruptcy, creditors, or legal action. Business owners and other successful professionals can make sure they retain possession of their assets by seeking the advice of a qualified law professional.
It is no secret that the number of bankruptcies, lawsuits and divorces has reached a staggering level. Most people do not believe it can happen to them, but the truth is anyone is at risk of losing their hard-earned money if they are faced with a lawsuit. Specific money management strategies can help protect assets when that occurs. In California, individuals can avoid having their assets seized by employing various strategies, including purchasing insurance to transfer risk, limiting personal liability, and exempting personal assets from claims by creditors.
Federal and state statutes automatically protect certain assets against creditor claims. Click here for a list of assets that are exempt in California. Unlike some other states, California requires residents to select state exemptions and does not offer the option of choosing between federal and state exemptions.
After reviewing the list of protected assets, it may be wise to seek a lawyer’s advice for converting certain assets from non-exempt to exempt.
How Business Owners and Professionals Can Limit Personal Liability
Business owners have the option of maintaining a sole proprietorship or operating their company as a Limited Liability Company or Corporation. Regardless of industry or company size, a sole proprietorship is attractive because it is less expensive to establish at the beginning. Most people want to avoid the legal costs associated with the creation and maintenance of an LLC or Corporation. What they may not realize is that operating as a legal entity has several advantages, including the ability to reduce risk.
When a sole proprietor is sued, the lawsuit is filed against all assets the plaintiff owns personally while a lawsuit filed against a Corporation or LLC only involves the assets owned by the company. In order to manage your risk effectively, you must select the option that best suits your personal needs.
Buying Insurance to Transfer Risk
It is important to review your liability insurance policy on a regular basis with your insurance agent. You must make sure your policy is current. At the same time, you must make sure you are able to afford the deductible and the coverage limit is adequate for your purposes. Make sure your policy does not include any loopholes. The goal is to transfer any risk that is beyond your financial means by finding a policy that offers an affordable premium. Understanding the difference between transferred and retained risks is crucial.