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Property And Asset Protection: Why Is It Important?

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Imagine working hard to provide for your family only to lose it because you didn’t put up measures to protect your assets. You might think that this scenario won’t happen to you. However, as a business owner, investor, or even an employee, this type of risk is always waiting to pounce on the unwary.

Property and asset protection in the USA entails the use of legal strategies to guard your wealth. Companies like Mile High Estate Planning provide this type of service to help you in finding the best approach to taking care of your properties and assets, which, in turn, allows you to look out for your family.

Here are the reasons why property and asset protection is important:

1. Take Care of Your Family

The primary significance of safeguarding your properties and assets is that it can ease your worry about your children’s future. Filing the legal documents in place while you’re still alive and well can ensure that you appoint someone who you truly trust to run your business in the event that you pass. This process is crucial, especially if you’re the sole breadwinner in the family and your kids are still minors. 

2. Separate Your Business From Personal Assets

On the business end of things, it’s prudent to draw a distinctive line between your business and personal assets. Upon starting a venture, you typically have to borrow capital from banks and other financial institutions. It’s all well and good if you’re able to repay your debt on time. However, this can be a problem when you pass, and you were unable to complete the payment. Creditors can legally seize all of your assets, leaving your family with nothing.

Property and asset protection can help you separate your business from your personal wealth. 

3. Minimize Risks And Losses

Because there are things in life that aren’t in your control, risks are inevitable. The best thing you can do is to find ways to mitigate these probabilities. 

While death is an inescapable truth as a mortal, the risk you face is in dying early that you can no longer provide for your spouse and children. Another possibility is that you become incapacitated, which renders you unable to manage your business and other investments. Asset protection enables you to control the measures that your executor can follow in case these unfortunate events occur. 

This legal process can also help you minimize inheritance losses due to estate taxes through an intentionally defective grantor trust (IDGT). An IDGT is useful in freezing some of your assets for the benefit of your heirs. Plus, it’s an irreversible trust, so it cannot be taken advantage of by creditors in case you still owe them money.

You can maximize the IDGT for taxes pertaining to estate, gift, generation-skipping transfer (GST), and income. It allows the grantor to continue being the owner of the trust for the purpose of income tax, but it automatically eliminates the assets from your estate. Basically, you’ll pay the tax on behalf of your beneficiaries so that they can get the entire value of their inheritance.

These are the grantor trust provisions you can choose from:

  • Reclaiming Trust Assets - You retain the power to reacquire assets from the trust and exchange them for another property or type with an equivalent value. It will not affect the status of the gift or trust.

  • Taking Loans From The Trust - You can also borrow money from the trust without interest or security. This is acceptable because, technically, the asset is still yours even if it’s frozen.

  • Updating The Beneficiaries - You can change the beneficiaries of the trust according to your preferences. You may decide to add heirs to your trust as your family grows bigger.

4. Prevent Undue Seizure Of Your Assets

You also have to be wary of people who want to take advantage of businesses, especially when it comes to legal claims. Asset protection can separate your business and personal properties.

Conclusion

Consult a lawyer who specializes in property and asset protection to help you prepare your legal documents in case of your death or incapacity. It may seem morbid, but it’s wise to put up safety measures to mitigate these types of risks. This way, you ease your worries about the future of your family after you’ve passed.

 

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