Asset Loss Protection Policy Prevention

July 11, 2004
By Monish Datta

Since assets are anything that has a value to its owner, the safety of both tangible and intangible assets should be protected. As well as protecting physical property such as buildings, plant and stock, a business should also consider the safety of intangibles such as intellectual property (patents, copyrights, designs) and intellectual capital (knowledge, skills, business processes.). Read on to learn about asset loss protection policy prevention.

A complete asset protection plan can prevent or significantly reduce risks, and insulate business and personal assets from the claims of creditors. Unfortunately, many small business owners are unaware of these principles, or simply misunderstand them.

Your degree of exposure to risk of liability, the type of assets you own, and your total net worth are essential factors to consider when you and your lawyer develop a strategy for asset protection

Insurance is the most common asset protection technique. By "transferring" the risk to an insurance company, you can usually protect your assets. But even if you buy insurance, it might not cover all possible risks that you face, or the amount you buy might not be sufficient, or the insurance company may be able to deny the claim (perhaps it could claim there were misstatements made in your application), or the insurance company may become insolvent. Asset protection planning helps you prepare for these "wild-card risks"

All assets are not the treated in the same manner. Some assets are exempt from attack, while others need more protection. State law governs whether a property is exempt or non-exempt. When looking at your state law, be sure to check to see how much of an exemption is allowed for the particular type of property - it may be completely exempt, or exempt only up to a certain amount.

Using the applicable exemptions, you and a knowledgeable attorney can structure your property holdings to turn non-exempt property into exempt property.