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Raymond James: A column by James Kruzan


ABC's of asset protection



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December 29, 2010 - Accidents, lawsuits, taxes and other financial risks are simply the facts of life. Here are a few basic ways you can protect your assets aside from using insurance.

A is for ADVICE. Your first step is to engage professionals. You'll need a variety: legal, tax, and financial. Asset protection should not take place in a vacuum so a multifaceted approach is necessary. Different assets are exposed to different types of risks. Depending on your specific situation, different types of risks require different types of protection be applied at different times. For example, a "qualified disclaimer" can potentially be quite useful in minimizing the portion of your family's wealth that goes to the IRS via the estate tax. Knowing when and how much to disclaim can be very valuable advice.

B is for BUSINESS. Your business is your own, not your neighbor's. Conversely, your personal investment account is your own, not your business creditor's. Or is it? Your business creditors may be able to reach your personal assets, and vice versa, especially if you are a sole proprietor. A partnership can be even worse, as your partner's personal creditors may be able to reach partnership assets. Additionally, you may be personally liable for your partner's professional actions, not just your own. Choice of business type can be instrumental in providing an asset protection element to your financial plan. Certain types of business entities and insurance products not only shield business partners from the business risks discussed; but, may also provide an efficient estate planning strategy.

C is for CONTRIBUTIONS. Contribute to your employer sponsored retirement plan. Contribute to your IRA. Your employer sponsored retirement plan enjoys federally legislated creditor protection under ERISA. ERISA protects your accrued benefit in your employer sponsored defined benefit (pension) plan, 412(i) plan, profit sharing or 401(k) plan. IRAs find their protection under federal Bankruptcy laws and under state law and are generally similarly protected.

James B. Kruzan, CFP, is a Registered Principal and Branch Manager for Raymond James Financial Services, Inc., Fenton and Clarkston.

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