The first quarter of 2020 brought upon us the unthinkable — a worldwide pandemic known as coronavirus, or COVID-19. A threat to our health, our businesses, our workforce, and most certainly, our wealth and assets. A destructive economic crisis that challenged many to rethink their careers, personal budget, and investments. Choices needed to be made regarding what bills to pay or not pay.
As we slowly move on from COVID-19, many people are feeling new uncertainties, especially when it comes to their assets, creditors, and potential lawsuits. Is it too late to start the asset preservation process? What else can be done to protect my investments from creditors?
Understanding asset preservation
No matter how much you own, or how wealthy you are (or aren’t), you need asset protection to protect what you have.
If you don’t protect your assets, you can expect that what you own can be taken from you. Meaning, if you get sued, you can lose everything! This especially holds true when you are behind on house payments or car payments, or simply deep in debt with a creditor.
To solve this, asset protection attorneys transfer your assets outside of your name before lawsuits or bankruptcy happen. This may include transferring monetary funds or ownership rights from one account to another.
Bankruptcies happen in a recession
History shows us that personal bankruptcies are all too common in a recession or depression. In 2008, over one million were filed. That number quickly escalated to 1.5 million in 2010 (as most people weather the storm before filing). Given the coronavirus pandemic is wreaking similar havoc on our economy, it is believed we will see a similar impact in 2020 (and the years following).
Are you at risk? While having a lot of debt is always a factor, it’s essential to know that bankruptcy most often affects the middle-class that does not have much in savings. If this is you, do not wait to take action. Live comfortably within your budget, find ways to earn new income, and most importantly, speak to a financial advisor about smart asset protection options.
Ways to protect your assets
To protect what you have, you need to take defensive measures to make it more difficult for creditors to seize your assets in the event of a lawsuit or bankruptcy.
Your financial advisor may recommend the following asset protection strategies:
- Move cash into a protected retirement account
- Property title transfer
- Get a homestead exemption
- Use annuities and/or life insurance
- Utilize trusts
- Transfer ownership or gift assets
- Separate legal structures or arrangements
Asset protection during COVID-19
We’ve been asked many times: what can I do to protect my assets during COVID-19? The honest answer is that it’s quite challenging to start a preservation process now without looking like you’re making a fraudulent transfer. But it’s not impossible.
If you are deep in debt and sued before protecting your assets, you may still have (limited) options. So, it’s worth exploring your opportunities with a certified financial advisor, and you should do so immediately.
Keep investing in your 401k
While you continue to navigate your finances during the ongoing pandemic, always remember the importance of staying in the market. Remember, stocks’ prices are lower, which means you’re getting more bang for your buck than you usually would. If you pull out your money now, you’re robbing yourself of the chance to regain what you lost.
And if you’re fortunate enough to have money to spend, consider investing additional capital in your long-term plans (as appropriate). Like the one seen in March, sharp market downturns generally produce tremendous sales on high-quality stocks.
It’s also important to note that individual retirement accounts (IRAs) have federal law protection as long as they are ERISA-qualified (like a 401k). Your IRA might have even more protection, depending on your state’s laws.
Stay focused and plan for the future
Many have already found ways to persevere, shift gears, and even rebuild even with no end in sight. As you do that, don’t forget to be proactive about preserving your assets. If you plan ahead, your assets can be exempt from the claims of creditors.
Give one of our advisors a call and learn about the different asset protection and investment strategies we can take to protect your wealth.