5 Effective Asset Protection Strategies For Business Owners

Bloomfield Township estate planning lawyer

Asset protection is a form of legal planning that incorporates other types of legal planning and fields such as management of risk. Asset protection planning is used by business owners to provide a good defense against creditors and litigants. Asset protection refers to the use of risk management products along with legally acceptable solutions to prevent a person’s wealth from being taken unjustly.

Timing is an important consideration if an asset protection plan is to be effective. While you can do some things after the filing of the lawsuit, it is always advisable to have the strategies and plan in place before they are required. One of the best ways to look at asset planning is to take it as a form of pre-litigation planning.

Asset Protection Strategies

Successful business owners can use a wide variety of asset protection strategies. High-quality liability insurance is usually the starting point. However, successful business owners have other advanced asset protection strategies that they can use including:

  1. Equity Stripping

It refers to the reduction of equity in a property such as a business. By reducing the amount of equity a successful business owner holds, he or she increases the chances of the assets not being included in a lawsuit. The successful business owner is still able to use cash flows from the assets.

  1. Private Placement Life Insurance

The wealth taken out of the business can be invested in such a way that owners and investors can keep the money out of the hands of litigants and creditors. Private placement life insurance is one example of this. Private placement life insurance refers to where alternative investments are tagged under a life insurance banner. This approach offers considerable tax benefits. It can provide meaningful asset protection from creditors and litigants depending on the jurisdiction.

  1. Captive Insurance Companies

Successful business owners find captive insurance companies quite appealing. They are created to help businesses insure themselves against certain risks. Captive insurance companies provide the benefit of asset protection along with the following benefits:

– Insuring risks that would have otherwise been too costly or otherwise uninsurable risks.

– Potential savings because of access to the reinsurance market

– Wealth accumulation capability in a tax-advantaged structure

– Tax deductions of the insurance premiums

  1. Qualified Retirement Plans

Qualified retirement plans can be highly effective asset protection plans. However, complications arise since most successful business owners find it difficult to amass significant amounts of money in such plans. However, defined benefit plans such as benefit-focused and cash-balance plans can be used to circumvent the problem.

  1. Offshore Asset Protection Trusts

Offshore asset protection trusts can be used for asset protection but require professional intervention to ensure that they are established and managed in the right way. The effectiveness of such trusts depends on how hard it is to obtain assets and get a judgment. It is critical to choose the correct jurisdiction in which to establish the trusts.

The Bottom Line

Successful business owners have a variety of effective asset protection strategies at their disposal. Irrespective of the choice of asset protection strategy, it is important that they address other legal and financial concerns besides asset protection and that their use is customized to the needs of successful business owners.

Schedule Your Free Consultation with Our Michigan Experienced Estate Planning Attorney

Einheuser Legal, P.C. is an estate planning law firm in Bingham Farms, Michigan. We help families set up wills and living trusts. Attorney Michael Einheuser is an experienced estate planning lawyer serving residents in Bingham Farms, Troy, Farmington Hills, Rochester Hills, Southfield, West Bloomfield Township and Bloomfield Township.

Schedule your free consultation today by calling 248-398-4665.

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