Asset Protection for Entrepreneurs

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For entrepreneurs, frivolous and unfounded lawsuits are a matter of when not if. So, if you don’t have an asset protection plan in place, you are most likely looking to have your assets taken away unfairly at some point in the future.

However, not all asset protection strategies are created equal. “Asset protection can be approached from many angles,” says PJ DiNuzzo, founder and principal consultant of DiNuzzo Middle-Market Family Office and author of the Wall Street Journal best-selling book, The DiNuzzo Middle-Market Family Office™ Breakthrough: Creating Strategic Tax, Risky Cash Flow, and Lifestyle Options for Successful Private Business Owners and Affluent Families. “The first is the legal side. This includes estate planning, litigation and business structuring. Asset protection here means bringing together different parts of the legal world into a cohesive strategy. The individual uses different legal technologies to obtain this protection.

“There is also the insurance side, ideally in harmony with the legal side.” PJ added: “This includes policies needed to protect personal assets like homes and cars, or even pension plan assets. This is also where the umbrella cover comes in.”

Finally, asset protection should also be approached from a broad wealth planning perspective. On this, PJ noted, “Asset protection should be part of an overall wealth planning strategy for the individual. This strategy naturally includes budgeting for insurance and litigation expenses, but also anticipates and plans for the needs of the years to come.


Buyer Beware

One obvious mistake people make with asset protection? Pay no attention to it until it’s too late. The saying that people often lock the barn door after the horses have run away, not before, applies here. For example, you cannot protect your assets by moving them to safer positions after receiving legal documents. This is called a fraudulent transfer.

Also, wealthy people sometimes think they have done something to protect their assets, but they are only doing the bare minimum and are completely unprepared for real responsibilities. It means adopting solutions that act like a placebo in their minds, but in reality are neither relevant nor sufficient. For example, they may buy an umbrella policy just to tick the box without doing the proper calculation for the right level of coverage.

Moreover, there are many sellers and service providers in this field who do not sell useful products. Affluent people should be careful to avoid being taken advantage of in this area.

“The Asset Protection Principles apply to anyone who has significant assets and wishes to safeguard them,” says Mike DiNuzzo, senior vice president, director and risk management team leader at DiNuzzo Wealth Management. “This is especially true for middle-market business owners who have a long-term financial plan, or business owners who want one. If you don’t want your financial image destroyed by a frivolous lawsuit or other liability, it can be worth its weight in gold.

This especially applies to public figures or influential people who can be even bigger targets of frivolous litigation. “We live in a very litigious society. Anyone at high risk of being sued, such as contractors, real estate developers, YouTube or other social media personalities, or people working in highly litigious industries, such as the medical professions, should regularly review their asset protection strategy,” added Mike.


Take a decision

According to Mike, you have to “understand the rules of your primary state of residence. Different states may have significantly different laws and ways of handling asset protection, lawsuits, and insurance. Additionally, you should work with a professional who understands the legal tests and precedents regarding the assets you need to protect to ensure that you really are as protected as you think.

As Mike and PJ note, it’s essential to work with professionals who not only understand the rules, but also know how they fit into the bigger picture of your goals. With such an important topic, you might consider working with a middle-market Family Office or other integrated group of professionals who understand asset protection and work together to ensure your plan is optimized and all of your professionals are on board. the same wavelength.


RUSS ALAN PRINCE is executive director of Private Wealth magazine (pw-mag.com) and chief content officer for High-Net-Worth Genius (hnwgenius.com). He consults family offices, quick-and-rich entrepreneurs and selected professionals.

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