The first thing to do is to have a plan in place before anything bad happens to you. Even if you are one of the luck ones and nothing ever bad happens, eventually as a fact, everyone dies.
When you die, your bank accounts are frozen, and an executor is appointed to wrap up your estate. This means finding everyone you owed money to, and settling the debts. If you have a family, and all your assets are in your own name, your spouse could be unable to access your funds for up to 2 years.
There are three major concerns when it comes to protecting your assets: estate duties, income taxes, and lawsuits.
Estate duties
When you die, the government claims a percentage of the value of your estate. This amount varies from country to country, and it could be anything from 20% to as much as 55%.
The solution to the estate duty problem is to ensure that your estate is worth as little as possible when you die. Moving your assets into a living trust could be a good solution, as the trust is not taxed upon your death.
Income tax
How do you legally reduce your tax liability? One way is to decrease your income to an absolute minimum. Anything you need could be paid for by a business. For instance, if you need a new laptop, it could be paid for by your corporation or living trust. It is a legitimate business expense, as long as you use it for generating income, and not just for playing games.
The expenses of a business are deducted from its income before taxes are calculated. For individuals working for an employer, taxes are deducted before you even get your paycheck. That means that your personal expenses are paid for with after-tax income. If a separate legal entity can pay some of these expenses, it reduces the amount of money you need to earn, and the amount of tax you need to pay.
Lawsuits
The first thing that happens when someone wants to sue you is that his or her lawyer will try to find out what you are worth.
It is not difficult to find out someone's net worth by examining public records. These days, on the internet, it is even easier. What you need to do is look like a poor target. This could mean transferring as many assets as possible into a separate legal entity, which you do not own, but do control. This could be a living trust, or a corporation.
It might also mean that you ensure that properties in your own name are mortgaged to the hilt, so that your net asset value (the difference between what you own and what you owe) is as low as possible. Ideally, you want your assets and your income to be as small as possible, so that you are not worth suing you.
In conclusion
Everyone has different financial needs. Laws are different from country to country, and from state to state. It is essential that you get professional advice from a competent financial advisor before doing anything.
If you are in financial trouble, it is already too late. If you transfer assets in order to put them out of reach of your creditors, it may be seen as fraudulent and illegal. You need to have a plan in place before you are sued, and before anyone tries to take your assets away.
You may think that you are too young to worry about asset protection, but it is not too early to get a plan in place. It is a cliché, but still true: If you fail to plan, you plan to fail.
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