5 Asset Protection Planning Mistakes That Can Annihilate Your Business And Personal Finances!
By Alan G. Orlowsky, J.D., C.P.A.
The honest unvarnished truth is that the vast majority of business owners and individuals fail to take simple precautions to protect and preserve their personal and business wealth. Regardless of the value of your assets, they can be protected from unforeseen or even foreseeable, business and personal risk. Catastrophe may occur unexpectedly and can annihilate even the best run business and personal financial portfolio. The recent devastating recession has heightened awareness of this sobering fact. As such, many of my clients now realize that it is incumbent upon themselves, as prudent businessmen and/or investors, to implement “asset protection planning strategies” that will insulate their economic interests from events beyond their control that could otherwise lead to economic annihilation! As a practicing attorney with over 25 years of experience, I have witnessed firsthand how little or no asset protection planning can lead to catastrophic results which could have been avoided through the use of basic asset protection strategies. This is what I have found:
5 of the most common asset protection planning mistakes I see individuals and business owners make are:
- Failure to legally separate business from personal assets. This mistake is made all the time and allows a business creditor to attack the personal assets of a business owner and his or her spouse. Many business owners erroneously believe they are protected by their corporate shield when in fact they are not. Avoid this mistake and you just might avoid a personal Waterloo.
- Failure to have or maintain required corporate legal records. Time after time I see business owners who fail to expend the resources to create and maintain their corporate records. People are notoriously pound wise and penny foolish and just don’t want to expend the time or finances engaging an attorney. In the long run failure to do so can lead to economic devastation. You just have to have good and up to date corporate records in order to protect you business, and sometimes even your personal assets.
- Failure to hire a good attorney. Failure to hire a good attorney to navigate you through a virtual maze of rules and regulations is like rafting down the Amazon River in an inner-tube! Again, I have seen DIY (do it yourself) business records, contracts and paperwork lead to huge financial problems. I advise all my clients that it is always a lot cheaper to hire me now to prevent a legal problem then to hire me later to fix it.
- Unnecessarily having a spouse take on business liability exposure. It is not an honor to be an officer or director of your spouse’s company…..it is an obligation! Involvement in your spouse’s business exposes you to lawsuits, bank obligations and worst of all…..Federal and State Tax obligations!. Such exposure violates one of my most sacrosanct rules…..keep marriage out of it!
- No Estate Planning. There is no easier way to ruin your family’s future than by failing to have a Will and Trust and the planning that accompanies them. There can be huge business and personal problems caused by an unplanned death; a few of them follow:
- forced sale of a business to a surviving partner
- loss of income for surviving family members
- fighting among siblings for control of family assets
- squandering a lifetime of your hard work and
- government involvement and taxes!
If you have a business, investments and a family and you wish to protect against the harsh realities and consequences of an unforgiving world, you must engage in at least the basic asset protection strategies that are available. Nobody can go it alone, so you will need to hire trained professionals to build the firewalls required in a risky and unpredictable world.
About the Author
Alan G. Orlowsky, President of Orlowsky & Wilson, Ltd. in Lincolnshire, Illinois, has been counseling people on estate planning for 28 years. He previously worked for the IRS in its Estate and Gift Tax Division. He also worked for the Deloitte & Touche accounting firm, and he has taught taxation and accounting at Loyola University of Chicago, School of Business.
Al is a contributing author of the book 21st Century Wealth (Esperti Peterson Institute, Denver, 2000), and has written numerous articles on the subject of estate planning. Contact Alan Orlowsky by email or call 847-325-5559.