In recent decades, wealth creation has become more difficult. As home prices and inflation have soared, the creation and preservation of a nest egg have become an accomplishment to be proud of. Just as the creation of wealth has become more difficult, so too has wealth preservation, particularly in a highly litigious society. If you live in Arizona, how do you protect yourself against lawsuits or other legal threats during these times? The answer is: with an Arizona law-based asset protection planning strategy.
What Is Asset Protection Planning?
It’s critical to define asset protection planning, as many people believe it involves “hiding” wealth. This is not the case. True asset protection is a legal process that means working within existing Arizona state and federal laws to protect yourself against legal claims that could cost you a great deal of money. The goal is to make yourself, your company, and your heirs into less desirable targets for those who might file liability claims against you or your estate. It might involve taking steps to ensure business entities are formed and filed properly or creating trusts that are specifically designed to protect your loved ones against future creditors.
Understanding the Three Types of Liability and How to Mitigate It
When it comes to legal liability, there are three types: professional, business, and personal.
Professional liability. This is often applied to people with jobs that often attract litigation: healthcare professionals, accountants, architects, and builders. There are few (if any) legal ways to protect yourself when it comes to professional liability, so it’s important to carry malpractice insurance if you work in a high-risk job.
Business liability. This is the liability carried by a company that performs services for others. It’s critical that businesses be structured in a way that a lawsuit against the business won’t risk the personal assets of the business owners. In Arizona, legal experts recommend pursuing a limited liability company (LLC), which protects managers from being personally financially liable for any debts or obligations incurred by the business.
Personal liability. Personal liability – risks that fall on individuals – might result from many sources, including real estate deals and tort claims (an accident on your property resulting in injury). Personal liability can also result from being a cosigner on a loan for someone who later defaults. While in many cases, insurance can prevent personal liability in the cases of car accidents or injuries on your property, not all personal liability can be solved with insurance.
Create a Multifaceted Wealth Protection Plan
Asset protection planning is a complex topic and often includes a variety of different strategies, including the creation of trusts. Employing a “do it yourself” approach can leave you open to all kinds of risks. For this reason, it’s worth consulting with an Arizona-based team of advisors, including an estate planning attorney, financial advisor, certified public accountant, and insurance professional to achieve maximum protection of your wealth.
Arizona-based Prime Wealth Advisors is a full-service tax, retirement planning, estate, and wealth management firm that can craft a robust wealth protection plan that will cover you, your business, and your heirs. Call 623.77.PRIME or visit our website for more information.