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 clich¨¦, but still true: If you

fail to plan, you plan to fail.