“Undeserved and frivolous lawsuits are often the scourge of business accomplishments and success and a destroyer of personal wealth,” says Carlo Scissors, president of the Brooklyn Chamber of Commerce and author of Maximizing Personal Wealth: An Advanced Planning Primer for Successful Business Owners, “In order to eliminate or minimize the damaging effect of the malicious and unfounded legal actions, asset protection planning is often a wise move.”
As a subset of risk management, asset protection planning is what can protect a business owner’s company and personal wealth against potential creditors and litigants, children-in-law and potential ex-spouses. Asset protection planning is the process of employing risk management products and advanced planning strategies to ensure an individual’s or family’s wealth is not unjustly taken.
Based on a survey of 513 business owners, about four out of five of them are concerned about being involved in unjust lawsuits or victimized in divorce proceedings. A lot of this consternation is the result of having been unfairly targeted in lawsuits or knowing people, often other business owners, who have been unfairly targeted in lawsuits. Not only is the potential for loss often exceedingly stressful and problematic, but also there’s the commonly intense anxiety over having to go through the lawsuit.
Of the 405 business owners who are concerned about possible lawsuits and the damage they can inflict, only 15 percent of them have an asset protection plan. Meanwhile, of the business who are concerned and do not have an asset protection plan, three out of five reported that no explained to them their options in this regard.
Moving beyond the astute use of property and liability insurance, some of the strategies are quite rudimentary while other ones are extremely sophisticated,” explains Frank Seneco president of Seneco & Associates, and advanced planning boutique, “More sophisticated approaches to asset protection planning incorporate transformation strategies where your assets are converted into different assets that are much harder if not impossible for creditors and litigants to acquire because the assets are protected by state bankruptcy laws. The homestead exemption, interests in limited partnerships or limited liability companies, and the selective use of life insurance and annuities are all examples of more complex approaches. The use of captive insurance companies is also very effective in the right situations.”
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