You may have worked hard to build a business, purchase investment property or have a nest egg for security, but there are many not so rare but scary stories about assets that disappear rapidly. Your business could suffer because of a faulty partnership or a single lawsuit could clean you out. It is important to know how to protect yourself and your assets from unexpected events. Your assets are particularly vulnerable if they are newly acquired such as a windfall from your business or an inheritance. Once you have secured the assets or the money, make sure it is taking care of with the right protection.
Sharing Assets and Money
Many relationships are built on trust, but they can improve or worsen over time. Many wise couples decide at the outset of their union keep their finances separate. If you deposit money into your account, in the case of a jointly held account, the cash also belongs to them. This can complicate matters if both parties have children from a former marriage, especially if, without really thinking about what this means to your children, you are sharing your inheritance with your spouse. The idea of separate finances may be touchy for some couples, but keeping things separate from the outset may be the best default option regardless of how close you may become through the years. After all, sharing should always be a conscious decision.
Having the Right Insurance
If you run a business or are a freelancer, you should consider having indemnity insurance and liability insurance. Indemnity insurance protects you from lawsuits filed by customers and clients claiming that you provided of flawed products or misleading information. This means that a simple mistake could cost you a significant amount of money, and even if you win the case, you will have to pay legal fees. For freelancers such as consultants and small businesses, indemnity insurance is as important as malpractice insurance is for doctors.
Liability insurance covers damages and injuries that occur when someone falls or is injured on your property. Liability insurance is something that many people should have for their vehicles. Unless you have clients actually showing up on your property, you may not need liability insurance. Speak with local insurance agents about the kind of insurance best protects your assets. If you run a business and feel you are vulnerable to liability lawsuits, it may be worth investing in liability insurance that is equal to your net worth.
A Word About Rental Property
If you purchased or inherited investment property, generating income from rent may seem like a simple way to make money. However, things may happen that can upset the renters and they may want to sue you for large amounts of money. Renters spend a lot of time on your property and may get to know some things about you which can make landlords particularly vulnerable to lawsuits by people who are upset and feel they can profit from them. Before renting out property, establish or an LLC or a business entity as a way of keeping your tenants away from your personal assets. If the tenant sues you, it will be against the assets in the business entity and not those you hold personally.
Assets can provide security and peace of mind, but they can also disappear if they are not protected adequately. Take steps to protect your assets by having the right insurance, being careful of partnerships and joint accounts and keeping your personal assets separate from your business or rentals.