Are you a business owner, or someone who has worked hard to save a legacy for your family? We all know that the number of divorces, lawsuits and bankruptcies is staggering. While no one believes lightning will strike them, wealth created through a lifetime of work, saving and investing can be lost overnight if these forms of man-made lightning do strike. To protect your assets from such disaster, proper risk management strategies should be given careful consideration. These strategies include exempting your assets from the claims of creditors and bad actors (either directed at you or those you care about), limiting your liability through legal entities, and transferring your risk through insurance.

Exempting Assets in MA

State and federal laws exempt some of your assets from the claims of creditors. Important to note is that while some states allow you to choose either the state or federal exemptions, in others you must use the state exemptions … and federal bankruptcy exemptions are not available. Once you have identified the protected asset classes available to you under applicable law, it may be prudent to maximize your protection by converting non-exempt assets into exempt assets.

Limiting Liability for Professionals & Business Owners

Many entrepreneurs operate their businesses as sole proprietors rather than through a legal entity, such as a Corporation or a Limited Liability Company. You might believe that just because your business is not in the Fortune 500, you don’t need to form a separate entity.  You may not want to incur legal fees or go through what you might see as a hassle. However, in addition to other advantages, conducting business through a legal entity may offer substantial risk management benefits. While lawsuits brought against a sole proprietorship are really lawsuits against the owner’s personal assets, lawsuits against a properly created and maintained legal entity could effectively shield your assets. Nevertheless, the selection of an appropriate legal entity is critical for managing your risk.

Transferring Risk with Insurance

Sometimes it’s not just about legal work.  When was the last time you reviewed the details of your liability insurance? Are your policies current? Are the coverage limits adequate and are the deductibles reasonable? Have you scrutinized the policies for loopholes? Take time to understand both the risks you have retained and the risks you have transferred.