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Insights on Wealth Management and Asset Protection Trends

Success frequently comes with a significant drawback: it can make you a potential lawsuit target! This includes unfounded and frivolous lawsuits that can devastate your financial well-being. That means you must take precautions to keep the assets you've toiled to acquire from being taken unfairly. Asset protection is not about "hiding money" but rather about proactively ensuring the financial security of your business and family.

If you are a property investor or business owner, the best way to do this is to seek legal counsel early on. Then, at regular intervals, ensure that your affairs are per the most recent compliance legislation. With this in mind, the year 2023 is expected to be dominated by various trends in the wealth management and asset protection industry. Let’s highlight some of them in this article!

More investors will "find solace" in an offshore trust.

Offshore trusts will also provide additional security. Offshore trusts are established in countries with favorable asset protection legislation. These countries frequently do not recognize judgments issued by American courts, making it difficult for international creditors to enforce their claims. You must, however, be aware of foreign reporting requirements. If you intend to use an offshore trust, you must adhere to appropriate reporting standards. For example, a U.S. owner of a foreign trust must ensure that the trustee files annual information returns, such as Form 3520-A.

Belize and Panama banks are particularly popular destinations for many investors looking to create offshore bank accounts due to their attractive tax regimes. However, many investors tout Belize to be the best option for offshore banking today due to the diversity of financial services and options on offer. As an investor, you will also enjoy much-needed anonymity and banking privacy on top of a business-friendly environment.

2023 will witness an increase in the creation of LLCs

Contributing funds to a limited liability company ("LLC") is an extremely efficient way to redistribute wealth among your family while maintaining control. While these company structures are commonly used for real estate and other assets, they are also effective in managing business interests. Set up an LLC or FLP, transfer assets to the entity, and then transfer a membership or limited partnership shares to yourself and additional family members to use this technique. This strategy facilitates wealth redistribution while also significantly protecting the assets of the members or limited partners because personal creditors cannot typically seize the entity's assets.

Domestic asset protection trusts' popularity will keep soaring this year!

DAPTs can be extremely beneficial in protecting your assets. Even if you are a discretionary beneficiary, the assets you transfer to the DAPT are protected from creditors. DAPTs are permitted in approximately one-third of the states; however, you are not required to live in a specific state to benefit from a DAPT. Depending on the state, a DAPT provides different levels of protection. Since the courts may challenge the enforceability of a DAPT whose grantor resides in another state, the trust must also be properly structured and funded.

The "old-school" insurance coverage approach will remain a popular wealth management strategy in 2023!

A good asset protection plan should include insurance policies that protect against various types of liability. Examples of liability insurance for your property include:

  • Auto insurance
  • Commercial liability insurance
  • Homeowners’ insurance
  • Personal liability coverage
  • Umbrella coverage
  • Workers’ compensation insurance

Many liability insurance policies cover your losses and legal defense and losses, but selecting plans with generous coverage limits is critical to ensure your assets are not jeopardized. Other types of insurance, such as a long-term care policy, protect you against potentially bankrupting expenses such as healthcare later in life.

More businesses and individuals will capitalize on statutory exemptions.

Another way to safeguard your family's assets is to fully utilize state and federal laws that exempt certain types of assets from creditor judgments. The protection of these exemptions varies by state. For example, many states provide a homestead exemption, which shields from creditors a certain amount (or the full value) of equity in your primary residence.

Similarly, many retirement plans, such as IRAs and 401(k)s, are classified as exempt assets by federal and state laws. According to Panama City based attorney, Idaliz H. Guiraud, “the benefits of capitalizing on statutory exemptions are why people advise investors to consider Belize or Panama.” This due to foreigners not having to pay tax on their earned income as long as it is not generated within the jurisdiction.

Final Take Away

Asset protection should not be used to avoid financial obligations or avoid credible creditors. The goal is to protect your assets from deceptive litigants and unjustified creditor claims while distributing your wealth tax-efficiently to loved ones.

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