While busy managing and planning for every phase of business, entrepreneurs should not be as the contractor who builds his own house last. Put personal priorities relative to personal conditions at the top of the list. After working hard to accumulate assets do not put off the protection of those assets. Here are several tips.
Review and protect your assets
The assets accumulated over the years have come at a considerable price, and I don’t mean only cost. The largest asset is typically a house however, other assets are important to protect as well. Those assets can be the business you own, stocks, bonds, a gun collection or other collectables. All of these assets have value and should be preserved and protected to pass on to family members.
To protect your assets, a few simple steps should be applied. First, create a will so there is a clear definition of how assets get passed to the people of your choice. Without a will, assets are subject to probate and a court-appointed trustee who, in the end, may distribute assets and property in a manner in which you do not intend. A will is a very simple, inexpensive way to ensure that assets are given to owners of choice. Your personal attorney can certainly guide you through this process.
Create a Will
A will should be reviewed annually. Pay particular attention to the terms and conditions of the Will and change it whenever a family event takes place. Birth, death, marriage, adoption or divorce are some family events that would be included.
Another method of protecting assets is through a trust, the most common type of trust is a family trust. A family trust is most often used to place a house in it and for purposes of passing the house to a spouse or children without legal interference. Assets can be placed in the family trust with assets in the name of two or more family members. This protects the asset in such a way as to create a smooth passage of ownership from one member of the trust to another.
Another important consideration is to own an asset under the “joint tenancy with right of survivorship” method. When one owner passes away, the ownership transfers directly to the surviving owner without tax, estate penalties, or the necessity of a Will to declare the transfer of ownership. Furthermore, this is a way to pass assets to children on a tax-free basis. There are some limitations on this, so be sure to review it closely with an attorney and an accountant.
There are other factors to consider; however, the last one we will discuss is insurance. Put the proper amount of Insurance in place to ensure the people left behind will be able to settle the affairs of the deceased. This could include business affairs as well as keeping the family in some semblance of life’s normalcy. There are many components that make up what is needed to keep a family financially sound. Some things to consider are: education for children and spouse, marriage expenses for daughters, church service, debt elimination including but not limited to mortgage, cars and credit cards debt. Do not forget the need for general living expenses.
With respect to general living expenses, often overlooked is the need to compensate for inflation. An easy rule of thumb is 3% per year. Add it on top of what you think is needed for each year the insurance is meant to cover. The exercise of determining the amount of insurance needed is important because it will lead you to a realistic view of what is needed for the family to live. The least expensive life insurance is a term policy, put it in place until it is time for other considerations such as a whole life policy or annuities.
These are simple methods of protecting your financial condition. Please put this effort at the top of the priority list to ensure ease of asset passage to your loved ones. Resources to accomplish this include your banker, lawyer, insurance agent and accountant.
Larry Friis is the Principal at High-touch Leadership, an advisory services firm for the financial services industry. He has served on the Board of Directors of two financial institutions and is a Professional speaker, a Doctoral Candidate, and an Adjunct Professor. He was a banker for more than 20 years. Larry can be reached at firstname.lastname@example.org