I’m an inveterate tool collector. I can’t pass a flea market or garage sale without stopping to buy tools. I’ve got a footlocker full of miscellaneous tools that I rarely ever use. They sit there, at the ready, awaiting my call. But, they’re neglected for the most part. Why? Because I’m just too lazy to put them to work. Over the years, my sloth has cost me a lot of money. I’ve a feeling that a lot of you readers have the same approach when it comes to financial tools.
In the past few weeks I’ve begun receiving calls from people with income tax problems that could have been avoided through the use of tax free exchanging. Others, have suddenly realized that elderly relatives have made no provisions for passing on their estates. For that matter, the people who have called about their parents’ lack of an estate plan have put off their own estate planning. I’ll probably be getting calls from their children in a few years, with the same complaint, hopefully not too late.
Taking positive action to protect assets has about the same allure as going on a regimen of diet and exercise. Oh sure, we all know we need it, but there’s no sense of urgency. That will come later when, as happened to one subscriber, a pregnant tenant decided to improve her pre-1978 house by sandpapering a surface which could have been painted with lead-based paint. He’d overlooked notifying her of the possibility of lead-based paint in the premises. She hadn’t signed the required waiver form. Fortunately, he took quick action to have the house inspected by licensed professionals to confirm that lead paint levels were far below government hazard levels. But it could have been disastrous.
If lead hazard levels had been excessive, and if the lady has anything less than a perfect child, years after the fact, the liability could be assigned to him. What jury could fail to return a million dollar verdict against a grubby landlord who had endangered a child’s life and ruined all future prospects because of the failure to warn an innocent tenant of the potential lead poisoning hazard? He’s begun to take a real interest in asset protection these days.
Privacy is a basic building block of asset protection. People who are perceived to have assets are targets for legal opportunists. A suit can come out of nowhere without warning to ruin your day. But, if you keep your financial affairs out of public view, you’ll eliminate 90% of the potential for litigation caused by minor mishaps. Once you’ve achieved a reasonable degree of financial privacy, you can begin to take more concrete steps to place assets out of harm’s way to protect them, but beware. There’s little time to lose. The Fraudulent Conveyance statutes make asset protection strategies of little value when they’re initiated ‘after the fact’. If you wait until legal trouble looms on the horizon, it’s usually too late.
Ben Franklin said that nothing is certain but death and taxes. He lived in a world without $1000+ per day hospitals and $10,000 per month nursing homes. Pre-planning for the medical needs of yourself and your extended family is critical to financial planning. Need-based Medicare, and Medicaid is going to place the costs of family medical care squarely on the backs of taxpayers whose only crime is that they planned ahead for their own financial independence.
Private insurance is going to become a more viable alternative in the years ahead. So are combinations of Trusts, Corporations, and Limited Liability Companies. These can be extremely valuable financial and operational tools, but only if you start using them. When combined with other strategies, they’ll increase after-tax cash flow while providing an uncommon degree of asset protection and privacy as a part of your estate building and planning. But it all starts with you.