What is an Asset?
An asset is anything already of value, or a resource of value that can be turned into cash at any time. Assets may be owned by individuals, companies, or the government. It may contain economic value, or future benefit. Future cash benefit assets may be something such as a company, or a patent. So how do you determine the different categories of assets?
Personal assets are a thing of present or future value that belong to any one individual or their household.
Common examples may include:
- Property or land
- Personal property, (house, boats, cars, etc.)
- Cash and cash equivalents
- Investments, bonds, annuities, cash value of life insurance policy and retirement funds
Your net worth is then calculated by subtracting your assets from your liabilities. To further explain: assets are what you own, liabilities are what you still owe. A positive net worth suggests your assets outweigh your liabilities. A negative net worth means you owe more than you owe. Or in other words, you’re in debt.
Personal assets may be calculated by actually sitting down and making note of everything you own outright. Then write down everything you owe on, and start to do the math. If your liabilities outweigh your assets, you may want to start reevaluating your finances to improve them. That sets you up correctly to begin protecting your assets. The more you own, the more protection planning is needed. The more you plan, the more you are securing your future self and financial protection.
When it comes to business assets, they may be defined as things of value that sustain their production and growth in the company. Assets in a business can include things such as:
- Raw materials
- Intellectual property
From there you’ll want to create a balance sheet. Which shows your companies assets and how they’re financed. A balance sheet provides the inside look on how a company is managing its resources. Typical balance sheets have two types of business assets: current and fixed.
Current assets are ones that can be converted to cash within one fiscal year. Current assets are used to finance day-to-day operational investments and business expenses.
Fixed assets are long term assets. They can be described as tangible assets that can be physically touched. Some examples may include office owned buildings, vehicles, machinery or furniture.
What is Protection Planning?
Asset protection planning is actively protecting your assets from creditors by taking legal steps. Which means taking assets that are subject to creditors’ claims, called nonexempt assets, and repositioning them as assets that are out of the reach of creditors’ claims, called exempt assets. Which may include, but is not limited to, lawsuits, business disputes, or divorce.
Protection planning may start with actions such as establishing asset protection trusts, or companies. It could also include restricting property to remove it’s equity, then putting those proceeds in some type of protective structure. Which then prevents asset seizures or liquidation in the time of a creditor strike. Which then frees more room and time for negotiation.
You cannot start protection planning when a creditor is already looking into taking your assets. This is because each state has laws that protect the creditor against those people who transfer assets out of their name with the intent to delay, or hinder the creditor.
A court will usually in these cases, reverse the asset transfers and insist you pay the creditor with those assets. They are seen as fraudulent, so you must have the planning done before a problem arises. Many people don’t realize that protection planning is long term planning. Meaning it cannot be done quickly and needs to be set in place long before a future problem were to arise.
If you have any type of asset that you don’t want to lose, you should look into protection planning. A lot of individuals assume asset protection planning is only for those of high net worth, or extremely high value. That’s the type of mindset that could land you in a tough position if ever a judgement were to happen.
Try to look at it this way. A family with a combined value of maybe $450,000 and a multi-millionaire. If the multi-millionaire were to be taken under by a creditor, it would only be a fraction of their wealth lost. The family would most likely lose everything. Both should have an asset protection plan in place. Protecting your assets whether you have a small amount, or larger, it’s equally as important.
Once you have calculated your individual or business net worth, you can begin foreseeing future finances and how much wealth you can expect. From that information you can begin to build a future estate plan. Estate planning includes addressing important details for your future finances and plans.
Things such as who will take care of your minor children if you die unexpectedly, who will take care of your finances if you become mentally incapable, and who will manage your assets and take care of your family members and spouse after you pass.
Your estate plan can also include asset protection planning through the use of advanced estate-planning techniques such as family limited liability companies and trusts for you, your spouse, and your children or other beneficiaries you leave them to.
Once you have planned your estate goals, you can coincide them with your financial goals and protect your assets from creditors by putting your asset protection plan in place. You will then be prepared for any future disaster financially and be able to protect most of your assets if a creditor or future lawsuit were to pursue you.
Ruesch and Reeve Law Firm in Hurricane, Utah is the perfect place to start your search for an attorney knowledgeable in estate planning and asset protection plans. A general law office located in Hurricane, Utah. Providing comprehensive services and consultations.
How Can Your Assets be Threatened?
There are everyday life threats that can put your assets at risk for loss. An accident could happen, or a lawsuit could be filed and you could unexpectedly be drained financially. Some common threats and examples to your personal assets could be:
- Spill/fall: You could not correctly secure a carpet in your home, causing someone to slip and fall.
- Auto accidents: You’re the cause of an auto accident. You damage someone else’s vehicle or property.
- Debt: Inability to make mortgage or car payments, causing you to lose them.
- Divorce: Assets can be taken or split, even retirement accounts.
Below are threats that could occur to business assets:
- Product liability: When manufacturers produce defective or dangerous products.
- Medical malpractice: Being negligent if working in the healthcare field.
- Work injury: Inadequate or unsafe work sites for your employees.
Insurance! Something everyone should already have in place to protect their assets. Not including the standard home and auto insurance. That’s something that should be a no brainer, as it is required. After comes what is called an umbrella policy. An umbrella policy helps protect your assets and other liabilities. It should not be used in the place of other insurance, as it is a stand alone policy. Meaning it’s a supplemental insurance used to fill in financial gaps of other things that may not be covered.
Retirement accounts are another great form of financial protection. If someone forces you into bankruptcy, most states protect those forms of accounts and they cannot be touched by creditors. That is unless they’re inherited from someone other than your spouse.
Estate Planning- Asset Protection Planning Methods
Whether it’s personal or business assets, Ruesch and Reeve are here to help you contract personal protection plans for your finances. Making sure in the act of a lawsuit, or visit from a creditor that you are protected.
You should start by making note of all your assets and liabilities. Then calculate your net worth and start putting your estate plan together. In the event of sudden life plan changes, you want your assets to be protected. After you have put together your estate plan, you should make sure you have long term asset protection plans in place.
There are no net worths too small to protect. Whether it be personal assets, you should have a plan for your family’s net worth. Even if it’s a smaller sum. When it comes to business, make sure your company’s value is protected and your employees cannot liquidate your assets in any sort of accident or liability lawsuit.
Don’t put off protecting your finances and assets until it’s too late. With law firms such as Ruesch and Reeve, located in Hurricane Utah, there’s no reason to cause a detriment to your financial future. They are highly educated in law practice including but not limited to: bankruptcy, business, and corporate law, estate planning and probate, family law and personal injury law.
At Ruesch and Reeve we work to understand your estate planning goals and develop the strategy to implement those to protect your family’s success. We provide standard estate planning for smaller estates, including preparation of simple wills and trusts always providing expert advice. We also specialize in estate planning for large more complex estates including preparation of complex wills and trust agreements, tax planning advice, implementing probate avoidance techniques, initiating gifting programs and rearrangement of property ownership and beneficiary designations to achieve estate planning goals. For more information see the article “Are You a Candidate for a Trust?“.