While success mostly comprise of positivism, it comes with a few drawbacks, too. For one, it can make you a magnet for frivolous and unfounded lawsuits, as well as personal attacks that can tarnish your reputation, financial stability, and wealth.
To avoid problems that can be detrimental to your financial health, it is important to make the necessary preparations as soon as possible. To protect your personal assets that you’ve worked so hard to grow from being taken away from you, the best course of action is to establish your financial security through asset planning and wealth management.
Let’s look at these two strategies that everyone must take to protect their hard-earned money, and by extension, their company and their loved ones, too.
What is Asset Protection?
Asset protection is an umbrella term that refers to various techniques that aim to protect your personal assets and belongings from claims made by creditors looking to seize your assets.
Although creditors strategize for the most effective debt collection techniques, debtors utilize asset protection for added security. A debtor who owns significant assets may opt for asset protection to shield their assets in case they fail to fulfil re-payment agreements. Apart from protecting oneself from creditors, asset protection can also be utilized for wealth preservation reasons, such as in the case of opening an international bank account to ensure your loved ones are financially secure in any eventuality.
How Does Asset Protection Work?
An asset protection strategy will be based on various factors. The degree of protection a debtor needs will depend on the following:
Identity
If the debtor is a natural person, it is crucial to take into account transmutation agreements present between a debtor and their spouse. Another factor to consider is the likelihood of a lawsuit for each spouse should there be any payment default issues. It is important to determine these factors to ensure that rights for property assets will be transferred to the individual with a “safer” financial status.
In case a debtor is an organization or company, the individual who acted as guarantor for the repayment will be solely liable for any possible asset seizure in the case of a lawsuit. For asset protection planning, it is crucial to take note of clauses that deem a guarantor to personally repay the debts incurred by a legal entity or organization in the chance that credits start seizing personal assets.
Creditor Identity
It is crucial to determine the identity and type of creditor a person is dealing with during the process of asset protection planning. In case the creditor is an established financial institution or organization, such as in the case of government, they are more likely to have the authority and power in seizing personal assets as compared to private lenders. Natural persons or legal entities indebted to aggressive creditors may need a comprehensive asset protection strategy in place.
Nature of the Claim
The type of claim and limitations included in a lending agreement will influence the degree of asset protection an individual or organization needs. Dischargeable claims, or those that can be written off by the court, can be utilized to protect personal assets upon filing for bankruptcy. This means that you may only require a lower degree of asset protection.
Asset Class
There are many types of asset classes that are exempt from claims made by creditors. Homestead exemption can protect homeowners from forced sales to repay debts. With this in mind, it is crucial for debtors to determine the types of assets that are involved in creditor claims, as well as the accompanying risks of each asset being seized in the event of a lawsuit.
The Different Asset Protection Strategies
Setting up asset holding vehicles
Assuming the role of owner for asset holding vehicles a corporation, limited liability company, trust, foundation, or limited partnership is an effective protection as per limited liability laws. In essence, individual owners of corporations, limited partnerships, limited liability companies, trusts, and foundations for asset protection purposes will not be held accountable for the debt incurred by their organization. Choosing the right legal form to acquire loans protects an owner’s personal assets from lawsuits and seizures.
Establishing Asset Protection Trusts
An asset protection trust refers to a specific type of trust bank that can hold assets based largely on the discretion of the settlor. This is known as one of the most effective forms of asset protection.
Personal or organizational assets that are a part of an asset protection trust are not entitled to the owners, who assume the role of beneficiaries holding equitable interest in the assets. Therefore, the assets are automatically protected from creditors without breaking tax evasion laws.
Transfer of Property Rights
A debtor who is a natural person has the option of transferring legal rights to assets to their spouses, relatives, and trusted friends to protect against claims made by lenders. Transfer of rights allows debtors to utilize their assets freely without the risk of losing it to lenders.
What is Wealth Management?
Wealth management is a collective term that refers to the wealth creation process itself. It involves a team of wealth management experts that analyzes the specific financial needs of client, making suggestions of the right financial products to invest in. The wealth management process com in various strategies that may include wealth protection, risk management, wealth assembly, strategic wealth positioning, and wealth distribution, among many others. Wealth management encompasses a wider scope and is ideal for long-term wealth creation purposes. Wealth management aims to create more passive income and asset foundation.
The Principles of Wealth Management
Clients that are looking to create a wealth management strategy seek the expertise of a wealth management expert. Financial consultants are usually hired to assume the function of a wealth manager. Expert wealth managers utilize a customized and highly flexible investment approach with additional risk management policy in the creation of a comprehensive wealth management plan.
The primary objective of wealth management consulting is to ensure clients gain full understanding of where their money will be spent and providing the benefits behind each investment.
The Relevance of Wealth Management
Managing wealth efficiently with the help of financial experts is a strategy that savvy individuals, groups, and legal entities utilize to create more wealth. Usually, individuals who have amassed a large sum of money will place them under savings to accumulate interest. The main aim is to provide financial stability and security to their loved ones. However, putting aside money under savings is not enough to create substantial wealth or additional income. It is therefore important to find other wealth management strategies to generate more money in a passive yet effective manner.
During wealth management planning, clients provide their individual financial goals and how they prefer to invest their money. The primary goal of all financial wealth managers is to allocate financial resources to profitable and proven investments. It is also the job of a wealth manager to multiple investments by entering sound investment policies or through effective tax planning strategies.
Without a well-strategized wealth management plan, it can be extremely challenging to meet an individual’s wealth creation and investment objectives. It is therefore important to determine your financial strengths and weaknesses to effective handle challenges along the way.
A financial manager helps in the implementation of the wealth management plan. He or she will also be responsible in monitoring the progress the plan. Wealth managers are also responsible in assisting clients executing strategies that secure the financial condition of loved ones.
The Advantages of Wealth Management
Helps in the development of a strategic financial plan
Clients gain expert insights in creating a sound and effective financial plan. By providing expert financial consulting, clients have a clear idea of the type of assets or strategies to invest in. Wealth managers also offer assistance in fulfilling requirements and goal setting for their clients. There is a lot of time investment in the creation of financial goals that meet the specific objectives of clients.
Reduces stress over financial stability and future
Wealth managers are available whenever clients need expert recommendations in times of financial uncertainties and challenges. Clients receive prompt financial analysis and recommendations whenever the need arises. You need a savvy wealth manager to help you wade through uneven market conditions. With the right wealth manager by your side, clients feel less stressed about their respective financial condition. Lastly, a wealth manager is responsible in organizing a client’s finances.
Highly personalized wealth management strategies
A wealth management strategy differs from person to person. When it comes to managing personal wealth, there is no one-size-fits-all formula. A seasoned wealth manager will always customize his approach based on the individual circumstances of each client. Apart from managing the finances of a client, a wealth manager also assumes the role of a financial counselor, offering the sound advice about certain financial matters.
Delivering flexible investment strategies
A reputable wealth manager will proactively find ways to further improve a client’s financial well-being. This perfectly matches the flexible investment approach, as clients, with the help of their financial managers collaborate looking at various investment categories and assessing prevailing market conditions.
During wealth management planning, expert wealth managers take a comprehensive approach assisting clients develop ways to overcome financial opportunities and challenges. Ultimately, a wealth manager must help clients make better financial decisions.
Damalion is committed to providing private clients and businesses a helping hand in devising financial strategies, solutions, and planning that lead to financial stability, security, and overall health. Our global service network consists of asset protection specialists, wealth managers, and other service providers that share our dedication of delivering innovative and proven solutions that are all geared towards their financial success. From business company formation to opening a bank account for wealth preservation purposes, Damalion will be at your service every step of the way. If you wish to learn more, reach out to a Damalion expert today.
This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
