We recently discussed Asset Protection on our weekly KDOW 1220 AM radio show, Wealth Preservation and You. Instead of the usual approach of how to protect large amounts of valuable assets, we looked at the subject from the perspective of an average middle-class homeowner — perhaps a small-business owner who does not have great wealth, but who does have assets worth protecting should a worst-case scenario arise.
Most of us normally don’t like to think about the possible worst-case scenarios that could affect us, but in the real world in which we live, bad things sometimes happen to good people. It is definitely better to understand that from a realistic perspective and deal with it properly than to ignore that fact and suffer the consequences later, when, as a common example, a teenager injures someone in an auto accident.
We all live with a certain amount of risk in our daily lives, which increases as we acquire valuable things when we grow up, beginning with a family and everything it takes to raise one: from a home to a savings account to automobiles. Maybe you’ve acquired some stocks or a 401(k) account, to plan ahead for your children’s education and your retirement. You may have invested in a few pieces of serious artwork or some gold jewelry, which has appreciated in value over the years. You may have started a small business along the way, which might include rental property or which may have grown considerably since it began.
One bad day can put all of this in jeopardy. Car collisions occur all of the time, to drivers of all ages, and people are injured in them, or worse, every day. If this type of worst-case scenario happens to you or a member of your family, proper protection of your personal assets becomes very difficult after the fact.
If you own a small business, one lawsuit can threaten its survival. Proper protection of your corporate assets should be a part of your business planning process, not an after-the-fact reaction to circumstances you should have anticipated. Tenants like to sue landlords. Business partners have heart attacks and die unexpectedly. Accidents will happen on the job. Products might fail – and consumers definitely will file lawsuits if they do.
One common, affordable solution to protecting the assets of the average working person, middle-class family, or small-business owner is an umbrella insurance policy, which can provide the necessary coverage and protection, at a reasonable price, for the majority of people with a moderate amount of risk.
During this Asset Protection edition of our radio show, we discussed umbrella policies on the phone, with a local State Farm insurance agent, Wen Ling Cheng, who mentioned that you might be able to adequately cover a home and a couple of cars, depending on the number of drivers, for less than $200 per year. At that price, it really makes sense to assess your risk and properly protect yourself from the risk of the realities of everyday life in a complicated world.
We also covered a lot of other related topics during our radio show, including how to determine your risk factor; living trusts; inside creditors compared to outside creditors; setting up an LLC versus a corporation; a charging order in Delaware compared to other states (e.g., Alaska, Wyoming, New Jersey and Nevada); and cross-state LLC registration. We also mentioned caveats to consider when thinking about purchasing forms, books or any type of service from do-it-yourself asset protection websites — or advertised seminars that offer guarantees in exchange for a mere few thousand dollars in advance. Caveat emptor!
To listen to a podcast of this radio show (originally broadcast on December 10, 2011), either as an online stream or a downloadable MP3, visit our Radio Show Archive.
Obviously, there is much to consider regarding the topic of Asset Protection, beginning with an accurate assessment of your level of risk and your willingness to gamble. As usual, we urge you to consider consulting with a qualified, licensed professional to ensure you have the proper knowledge with which to make important decisions that will have long-term legal and financial ramifications on your life and lifestyle.
To schedule a free consultation with the Law Offices of Connie Yi, P.C. about asset protection for your family or your business, please contact us. For your convenience, we have four conveniently located offices in the Bay area: San Francisco, San Mateo, San Jose, and Pleasanton.