I’ve got to tell you, I’m a little bit sick and tired of the traditional personal finance advice out there that is telling you to pay off your debt and pay down your mortgage.
 
Insisting that you’ll experience financial freedom when you’ve got 6 months savings in the bank, no one you owe money to and you’re on your way to a relaxing retirement.

That’s all well and good, but it’s also not entirely true.

It’s not true in two regards: 

1) You don’t have to wait until you’ve got 6 months savings and no debt to experience financial freedom.  You can experience financial freedom right now.
 
2) Paying off your mortgage and all your debt could actually be harmful to your financial well-being, especially right now.

Now, that second statement is a big one, especially because it flies in the face of the traditionalists who say financial freedom is only possible with no debt.

But, consider this:

Imagine that you had $5,000 of credit card debt, owed $25,000 on a line of credit and had $50,000 in available remaining credit on your line and $20,000 available credit on your credit cards.  Now imagine that you were diligently doing what the traditionalists said and paying down your debt, a little bit at a time.  You were staying current on your payments and even paying a bit more than the minimums each month. 

Then wham, your hours were cut at work and out of nowhere your credit card companies decreased your credit card limits and your lender yanked the remaining balance on your line of credit.

Now what do you do?

You’ve got no access to credit and the chances of you qualifying for credit now, given the tightened credit restrictions and the decrease in your income, are ? none.

What should you have done instead?

I’m about to give you a radical plan.  A plan that is not for the faint-hearted.  And, a plan that is all about understanding your best investment.  It’s a plan that requires a lot of belief in yourself and what I’ll call spiritual balls.

Here’s the plan:

Don’t pay off your debt.  Not now anyway.  If you’ve got a line of credit on your house, write a check to yourself for the balance NOW.   Your bank just may take it back tomorrow.

Now, I’m not saying to go out and blow that money on more stuff you don’t need, vacations, or other consumables.

I am saying to put it in your bank account and figure out how you can invest it so it’ll make more money than it’s costing you.

It’s the same with available credit on your credit cards.  I’ve got several low interest credit cards ? about 4.9%.  I know that I can use that credit and earn way more than that.  Not if I buy a big screen TV or go to Cabo, but if I make a great investment.  (If you have poor credit and your interest rates are high, this is likely not a good strategy for you because the return on your investment needs to beat the interest rate on your debt for this to make sense).

So, what’s your best investment?  What’s the best way you can make a 10, 15 or even 25% return on your investment dollars this year?

Invest in yourself!

Take that money and start a business.  Not any business though.  Start a business that will leverage your time and your resources in the best way possible.  It takes money to make money.

(By the way, you do not need to quit your current job to do this!  I started business #2 while I was still working full time in business #1.  Yes, it was stressful and took a lot of work, but it was SO worth it!)

So, use that money to find the best possible mentor you can and put aside some of the money to implement what you are learning.
 
The key is to find someone who has already done what you want to do and is going to show you the way step by step!

Make the commitment to yourself. You deserve it.

Two years ago, I paid Dave Dee $30,000 plus 5% of my business to coach me on how to build an information marketing business so I could work from home and leverage the knowledge I already had.  Within three months of working with him, I had made $115,000.

Today that business is a million dollar business.  I call that a good investment.

I’ll invest over 6 figures in coaching in 2009 even though I’ve already had a huge amount of success.  But, you know what?  I keep learning.  The most successful people do.  Some of that investment has been made with my own line of credit.  I know I’ll generate at least a million dollars from the investments I make.

If you believe in yourself, there is no better investment than you.  Don’t wait for the bank to take its’ money back.  Invest in yourself and watch that investment pay off for the rest of your life.

Last week, we talked about what a business entity is and whether you should use one for your business,.. The short answer? Yes, if you want to grow your business and shield your personal assets from your business activities.

This week, we’ll cover what kind of entity you should use and where you should set that entity up.

You’ll recall, we are really talking about either an LLC (Limited Liability Company) or an S-Corp (Corporation filing an election for special taxation with the IRS). You can form a C-Corporation or a Limited Partnership, but if you are considering that, make sure you are talking to a lawyer who is familiar with the specifics of your specific situation and is advising you personally.

With both LLCs and S-Corps, you are taxed only once on the income of the entity , meaning that all of the income and expenses will be reported on an information return filed with the IRS, but the actual taxes are paid by the shareholders or members of the entity. This is called pass-through taxation.

You’ll recall from last week, that I said the purpose of your business entity is to limit your liability as a business owner. This is to encourage business owners to take risks that they would not take if they had unlimited personal liability.

Here’s the thing though, the shield is only intact if certain formalities are maintained, such as proper filings with the State, annual meetings of the shareholders (for corporations), and separation of all financial activities between you and the entity.

Far too often, I’ve come across business owners who used an incorporation service, a shoddy lawyer, or a CPA to incorporate their business and when I asked these business owners where their operating agreements, bylaws, annual meeting minutes and state filings were kept, they couldn’t tell me.

Why is that? Because they didn’t realize that merely filing articles of incorporation with the State does not provide liability protection.

Your corporate entity must be established correctly from the beginning with governing documents and then maintained on a yearly basis.

If you don’t do that, you may come to find out too late that your business entity doesn’t provide the protection you thought it did.

So, make sure that once you decide what kind of an entity to use, you set it up right and then maintain that entity.

Now, before we talk about the type of entity, let’s talk about one additional kind of asset protection that you need to take into account.

Up until now, we’ve been talking about what I call “inside asset protection” or protection against liabilities that are incurred by the corporation, within the bubble that I described in last week’s post.

There’s another kind of protection that is often overlooked and that’s “outside asset protection”.

Outside asset protection protects your business from your potential personal liabilities.
For example, if you are in a car accident, file for personal bankruptcy, or are sued by a business partner or colleague or personally guarantee a debt. These are all personal risks that are happening outside your business entity.

In most cases, your business entity is not protected from your personal risks. That means if you are sued personally and a judgment is obtained against you, the judgment creditor could take your business entity from you in satisfaction of the judgment.

But, not always.

In certain States, notably Nevada, there is something called “charging order” protection. What this means is that if you are sued personally and a judgment is entered against you, your judgment creditor cannot take away your Nevada business entity, they can merely take a charging order against it.

This means that they have a right to distributions from the entity, but cannot force those distributions in satisfaction of the judgment.

This can be a big deal if you are concerned about your potential personal liabilities.

In that case, you will want to establish either a Nevada LLC or a Nevada S-Corporation.

If you could care less about charging order protection, you can form an entity in any State of the Union, but in most cases you will want to form it in your own home State where you will be doing business because no matter what if you use a foreign corporate form, you will need to qualify to do business in your State, which means you pay state income taxes there no matter what.

Yes, there are people who will tell you that you can avoid income taxes by setting up your entity in Nevada, but that is very rare. Like if your business is totally virtual and can actually have its principal place of business in Nevada. Or, if you live there, of course. Again, if this is something you are considering, talk to your lawyer.

Ok, so LLC or S-Corporation?

Well, there are pros and cons to both and I’m going to lawyer out on you at this point and tell you that this is really a decision you should be reaching with the guidance of your own lawyer and your own CPA working together to advise you.

Your decision will have tax consequences that cannot be considered based on what you read in a general article that does not take into account the specifics of your situation.

So before you incorporate any sort of entity, make sure to consult with your own personal lawyer and your CPA to make the decision about an LLC or an S-Corporation for your business structure.

Lately, I’ve had a lot of people asking me whether they should incorporate their business and if so, what form of entity to use.

Of course, there is no universal answer. If there was, there’d be only one kind of business entity.

Before we talk about what kind of entity is right for your business, let’s do a quick review on what is an entity and why you need one for your business.

Think of an entity as a structure that will hold the assets (and liabilities) of your business. You can imagine this structure as anything that works for you. I like to think of it as a bubble.

This bubble can come in the form of a Limited Liability Company (LLC) or a Corporation (either an S-Corporation or a C-Corporation). There are also forms of partnerships, including a Limited Partnership (LP), but if you are considering that, make sure you are working with an actual lawyer who is counseling you personally.

When you create an LLC or Corporation for your business, envision that you are blowing a bubble around your business like a shield. The bubble is formed by filing papers with the State in which your business entity will be incorporated. In many cases, that will be the State of your residence. But in some cases, which we’ll discuss, you may want to use another State, such as Delaware or Nevada.

Your bubble (entity) will also need to have a Federal Tax ID Number (like a SSN, but for an entity instead of a person) and documents that tell you how and any partners you may have how to operate the entity. For an LLC, these documents are called the Operating Agreement. For a Corporation, they are called the Bylaws.

If you work with a document service to incorporate your entity, make sure they are not just going to give you standard form bylaws or operating agreements. These documents should be customized to the specifics of your business and your vision for how your business will operate.

You should put a bubble around your business if you want your personal assets to be shielded from any of the liabilities of the business. With the bubble around your business, if anything happens inside the bubble your personal assets are not at risk from any of the liabilities of the business.

Yay.

What sort of liabilities?

Well, things like an employee or independent contractor bringing a lawsuit against you, or an employee getting into a car accident during work hours. Or things like entering into equipment or property leases. Contracting with vendors. Taking on business credit. All of these things could lead to potential liability. And, if these things are not done under the shield of your business entity, your personal assets would be at risk. No bueno.

The only situation in which I say an entity is not necessary is if you are in a low growth, hobby type business in which you will never have anyone working for you and don’t expect to make much money.

If you are working to grow your business, get it set up in an entity that will allow you to take as much risk as possible with as little risk to your personal assets as possible.

If you are having trouble paying your mortgage or afraid you might be in trouble once your adjustable rate mortgage (ARM) resets, you are probably noticing advertisements all over the place for people or companies claiming they can help you get your loan modified.

Before you pay anything to anyone, make sure you have the real scoop on loan modification.  Here’s what you need to know:

1.  What is loan modification?

Loan modification means your lender has agreed to reduce your interest rate or stretch out the length of your loan, thereby reducing your payments.  This reduction can be a permanent reduction or it may be a short-term reduction.  All of the terms of a loan modification are negotiable.

2. Can you negotiate your own loan modification?

Yes, you absolutely can negotiate your own loan modification.  If you have the time and energy to focus your energy on this and you feel confident in your negotiation skills, give it a shot on your own before paying someone else to handle it for you, by all means.

3.  Should you pay someone to negotiate your loan modification for you?

If you do not have the time or do not feel confident negotiating your own loan modification, you can hire someone to negotiate on your behalf, but make sure you take my guidance on this before you do.

There’s a lot of companies springing up and jumping into the loan modification market.  In many cases, these are the same unscrupulous mortgage brokers who put you into your loan in the first place.  Do not pay anyone other than a lawyer to negotiate your loan modification!

I’ve seen many companies representing that they are lawyer-backed or lawyer-associated.  These are not lawyers.  Do not pay them to negotiate your loan modification.

In some cases, we are seeing people pay up to $5,000 to one of these companies just to have the company send out a single letter to the lender requesting loan modification, get denied and say “Sorry we couldn’t help you.  Good luck!” and then you are stuck in the same situation you were before, but with even less money.  That’s the last thing you need.

4.  Who should you hire to handle your loan modification?

You should hire a lawyer who has experience reviewing loan documents and negotiating loan modifications and has a proven track record in the financial industry.

You see, in many cases the loans were not issued properly and a lawyer who knows what to look for in the loan paperwork may find defects that can be used as leverage points in the negotiations.

Plus, your lawyer is in a fiduciary relationship to you.  This means that your lawyer must act in your best interest, not his or her own, or your lawyer faces losing his or her bar license. These fly by night loan modification companies have no real risk if they screw you over because chances are they will be out of business within the next three years anyway.  Not your lawyer.

5.  Should you pay upfront for loan modification services?

You should only pay upfront for loan modification services if you are working with a lawyer or someone licensed by your State to accept upfront payments for loan modification.  And, you should find out if there is a guarantee program available in case the loan modification is not successful and what your responsibilities are under the guarantee.

6.  How much should you expect to pay for loan modification?

Loan modification handled by a reputable lawyer Personal Family Lawyer  is likely to run you between $3,500 and $5,000.  There are companies offering loan modification services in the $1,500 or $2,000 range, but these are the ones to look out for because oftentimes homeowners are finding that these are take the money and run kinds of places.  If you have paid upfront to a loan modification company and they were not able to obtain a modification for you, do talk to a qualified lawyer who handles loan modification Personal Family Lawyer and they may be able to get the funds you paid to the loan modification company back for you.

The following is a press release that all homeowners who are facing foreclosure or at risk of not being able to pay their mortgage need to see.  Do not get taken advantage of during this time of trouble!  Yes, you need to see help.  But, make sure that you are seeking help from trustworthy people, like your own personal lawyer.

If you cannot pay your mortgage or are about to face a reset of your interest rate and won’t be able to pay after your ARM resets, contact your neighborhood Personal Family Lawyer® for help.  Your lawyer stands in a fiduciary relationship to you, which means he or she has a legal obligation to treat you right.  If you are seeking a modification of your loan, you do NOT want to work with a mortgage broker, real estate agent or a fly by night scam artist.  Turn to someone who will be there for you throughout life, like your personal lawyer.

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California Attorney General Edmund G. Brown  Jar. today announced the arrests of three members of a fraud ring who preyed on desperate Southern California homeowners by falsely promising to renegotiate their home loans, but instead “ripped them off for thousands of dollars” while their homes fell into foreclosure.

“It’s appalling how these scammers took advantage of desperate homeowners and ripped them off for thousands of dollars,” Attorney General Brown said. “Our campaign against mortgage scams masquerading as foreclosure assistance will continue and even intensify.”

California Department of Justice Special Agents of the Bureau of Investigation and Intelligence arrested Rosa Conrado of San Bernardino, Saul Amador of West Covina, and Jesus Flores of Baldwin Park, believed to be members of the fraud ring. Law enforcement officers have issued arrest warrants for Juan Perez of Grand Terrace, and David Giron of Ontario, who are also suspected to be involved in the scheme. The Attorney General’s Office filed a 39-count complaint that includes multiple grand theft, money laundering and conspiracy charges against these suspects.

The arrests came after an investigation into First Gov, also operating as Foreclosure Prevention Services, uncovered that the company was soliciting hundreds of homeowners with mail flyers offering to help them stop the foreclosure process on their homes. The scammers falsely told homeowners that they would renegotiate their mortgages, reduce monthly payments, and transfer any delinquent loan amounts to the renegotiated principle. The company demanded an up-front fee, ranging from $1,500 to $5,000, to participate in the loan-modification program. The company also told the victims to stop any mortgage payments or communications with their lender, claiming they would interfere with the company’s effort to negotiate the loan modification.

When victims complained that they were still receiving delinquency or foreclosure notices from their lenders fraud-ring members told the victims that the mortgage loans had been renegotiated, but the lenders needed a “good faith” payment to secure the new accounts.

Homeowners made payments to accounts under business names such as “Reinstatement Department” or “Resolution Department” that made it appear as if the payment had been applied toward the loan. Bank records indicate that more than $700,000 was stolen from homeowners who fell victim to this scheme.

Typically, the scam initiated with a flyer sent to the homeowner. For example, Eleuteria and Arthur Washington of Redlands responded to a flyer she had received that falsely claimed to offer a way to renegotiate their home loan. On May 16, 2007, a representative of First Gov came to their residence. The Washingtons were asked for two cashier’s checks each for $2,023.58 (totaling $4,046.56), which equaled two times the combined total of the monthly payment on their first and second mortgage.

Although the checks were deposited that same day into the designated Bank of America account, Mrs. Washington continued to receive letters from her lenders that the house would be auctioned. Mrs. Washington’s numerous calls to First Gov went unanswered. Finally, she received a call from First Gov that her lenders had agreed to the loan modification.

The next day, Mrs. Washington received another call from First Gov that the new loan documents would be sent to her to sign. She was told the lender wanted an additional payment and was instructed to make a deposit to washington Mutual for $2,023.58.

After Mrs. Washington made the deposit, she never heard from First Gov again. She later learned from her lender that the loan was never renegotiated, and the lender had never heard of First Gov. As a result of the scam, the Washingtons were cheated out of more than $6,000.

California homeowners should be aware the fraud ring’s flyer is still being circulated.  The flyer is printed on
goldenrod-colored paper in a yellow envelope. Occasionally, the contact name and number that appear on the bottom are changed.  A copy of the flyer and mailing envelope are attached.

“Loan-modification scams are becoming more and more prevalent across the country, particularly in California,” Attorney General Brown said. “California homeowners should be aware of the warning signs of foreclosure scams, so they don’t fall victim to these cynical schemes.”

Today’s arrests are part of the California Attorney General’s ongoing crackdown on predatory lending and mortgage-fraud schemes in the state. In March, the Attorney General’s Office arrested Eric Pony and other members of Lifetime Financial Corporation for leading a similar mortgage-renegotiating scam that stole hundreds of thousands of dollars from California homeowners. Pony led the company in a predatory bait-and-switch loan-modification scam that targeted elderly and non-English speaking homeowners. The case is still pending in Los Angeles Superior Court.

Earlier this month, the California Attorney General’s Office secured $8.6 billion in loan relief for eligible homeowners in a landmark settlement with Countrywide Financial Corporation for engaging in deceptive and predatory lending practices that led many California families to lose their homes.

For homeowners who are behind in their mortgage payments or their home is already in foreclosure, services are available at little or no cost to help them save their home. For information about these services, consumers can visit www.yourhome.ca.gov or contact HOPE - Center for Foreclosure Solutions, a community-based organization that is available to assist them  with foreclosure-related issues, at (888) 995- HOPE or online at www.995hope.org . Homeowners considering paying for  foreclosure-assistance services, such as loan modification, should beware of anyone who tells them not to contact their lender or charges an upfront fee. It’s unlawful for companies that promise to help consumers in foreclosure to collect any money from them before they’ve done what was promised.

Also, consumers should remember that they may not transfer title on their property to avoid foreclosure without the consent of their  lender.

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Your neighborhood Personal Family Lawyer® can help with your loan modification.

The day my ex-husband and I combined our finances was far more significant to me than the day we got married.  Marriage was a big party and a piece of paper signed by the County Recorder.  Combining our bank accounts was a much bigger deal.

On the day we combined our bank accounts, I knew we were making a financial commitment to each other that would be difficult to unravel if things didn’t work out.
And they were.

Here’s a few things I wish I had known before we combined our finances:

1. Taxes

If you are married on the last day of the year, you will file a joint tax return for that whole year.  Even if you get married on December 31, you still file jointly for the whole year.  Yes, you can file as married people filing separately, but that’s not the same as filing two separate tax returns.  You are still taxed as a married couple.

This could save you money or it could cost you money.  Generally speaking, if you earn similar amounts of money, filing jointly will probably cost you more money.  If one of you earns substantially more than the other, it could save you money.

If you are getting married near the end of the year, run out the scenarios with your CPA or using an online tax calculator and consider whether you should postpone the official marriage date until after the 1st of the year.  I know that sounds weird, but if it could save you a lot on your taxes, go ahead and have the wedding, but wait to file the paperwork and make it official.

2. Combining Finances

It’s not always a great idea to combine your finances right away when you get married.  If you are both earning about the same amount of money and you don’t have any children on the way right away, keep your own separate accounts and agree to both contribute to a joint account, which you will pay family bills from.  Get used to this for a while before totally merging all of your accounts.

If one of you earns substantially less, you can adjust the contributions to the joint account pro rata.  If one of you plans to quit his or her job to stay home with the kids or otherwise take care of the family obligations, make sure you’ve discussed ahead of time how the non-breadwinner partner will have control over some of the family money for his or her personal expenses.

No matter what, make sure you each maintain at least one account that is your own account with your own money in it that is not under the control of the other partner.  Each partner needs to have their own financial autonomy even if one partner is the breadwinner and the other is not.  And, each partner should have their own individual credit cards in their names.

3. Community v. Separate Property

If you live in a community property state, all of the income you earn from your labor after you are married is considered community property, which means it belongs to both of you even if it is in a bank account with just the breadwinner’s name on it.  Any of the property you bring into the marriage with you remains your separate property, but only so long as you maintain it as separate property and don’t contribute it to the community.

If you put separate property into an account in both of your names, it becomes community property.  If you earn income on your separate property and that separate property has not been gifted to the community, the income is separate.

If you inherit money while you are married, that stays separate property, but only if you keep it in its own separate account and don’t mix it in with your family accounts.  Once you do, it’s community property.

4. Debt

Any debt you incur during your marriage, is very likely going to be debt owed by both of you, even if only one of you incurred it.  Yep, it’s sucky.  But, true.

So, before you get married and/or combine finances, each of you should show your entire hand. Create your personal net worth statements.  List out your assets and your liabilities.  Then swap the information.

Keep financial records of all assets owned during the month of marriage indicating current value of all assets and amount due on all debts.  This will come in handy if you end up getting divorced down the road and can save you tens of thousands of dollars in legal and accounting fees.

5. Estate Planning

Once you get married or even merely tie the financial knot, you need to get your estate plan in place.  Especially if you don’t have children yet, the law may not provide a default estate plan you’d be happy with.  In California, half of your assets could go to your spouse and half to your parents.  And, if you aren’t married, your whole estate could be left to your parents, leaving your life partner out in the cold.  Take the time to find out what would happen if you were incapacitated or died so you can make sure things would be as easy as possible for the one you love if anything happened to you.

Making the commitment to share a financial life with someone is a big step.  Before you tie the financial knot, make sure you are on the same page about what you want out of life and how you plan to grow, preserve and spend your family wealth.

If you’ve already got an estate plan in place and you are going through a divorce, you’ve got some steps to take because no matter how you cut it, divorce has a major impact on your estate plan. I hate to tell you that because I know that the last thing you want to think about in the middle of your divorce is your estate planning and yet, it’s critically important unless you want your ex to end up with control over all of your assets if anything happens to you.

Yep, that’s what could happen if you don’t address your estate planning as part of your divorce … your ex could end up with everything or at the very least in control of everything. 

For most people going through a divorce, this is the last thing they want. It certainly was for me!

To make sure this doesn’t happen, you need to revamp your estate plan and create a new Will, Trust, Powers of Attorney and Health Care Directives during your divorce and not wait until afterwards. 

Revamp Your Estate Plan During Your Divorce Or Your Ex Could Get Everything (including control of your medical decisions!)

Here’s the truth: if you are in an accident during your divorce, it’s your soon to be ex who will be making  your health care decisions, who will be in control of your money, and will inherit everything if you die unless you have new documents drafted.

Your estate planning lawyer should be one of the first calls you make when you file for divorce.
 
While your divorce is pending, your estate planning lawyer can prepare a divorce Will (a temporary Will that ensures your soon to be ex won’t inherit from you if you die), create a new Trust to receive the assets that you will receive after the divorce is final and update your health care directives and powers of attorney.  One thing to be careful of though is not to move any of your assets into your new Trust until after your divorce is final or until your divorce lawyer gives you the go-ahead.

Once the divorce is final and you know which assets you are receiving, you should then revisit your estate planning lawyer and get a new plan in place that will be established to cover what you have been given as part of the divorce and help you plan for your financial future.

Change Your Beneficiary Designations

You also want to make sure to review all of your beneficiary designations after your divorce. This is absolutely critical and often overlooked. And, you need to do it even if your divorce agreement says your ex won’t receive any benefits. If you don’t change your beneficiary designations, your agreement may be superseded!

There’s actually a case pending in the United States Supreme Court right now about this very thing.  Husband and wife got divorced and husband never changed his beneficiary designation on his pension account.  Then, Husband died.  The pension administrator paid the benefits to his ex-wife, as indicated by the beneficiary designation.  Husband’s daughter from a prior marriage sued for the benefits claiming that the ex-wife had given up her rights to the pension in the divorce agreement.  The first Court heard the case and agreed.  The appeals Court heard the case and disagreed, saying that the beneficiary designation trumped the divorce agreement. Now, the final answer will come from the Supreme Court.
 
You don’t want to put your family through this. So update your beneficiary designations.

Review Your Life Insurance Provisions.

If you have any kind of a requirement in your marital settlement agreement that life insurance should be maintained on the life of either spouse for the benefit of the children, you should have this provision reviewed by your estate planning lawyer.

We’ve seen so many provisions like this that are just not well thought out. For example, a provision that says “Husband shall maintain life insurance having an aggregate death benefit of $250,000 for the benefit of the minor children” sounds great, right?  But, this is just the kind of provision that provides no protection for the minor children at all.

How long does the insurance have to be maintained?  What type of insurance has to be used?

Can Husband just get a cheap 1 year term policy that needs to be renewed each year?

What if he gets ill and becomes uninsurable? Who should be the beneficiary of the policy?

An effective provision should provide the type of insurance and the minimum length of time it must be in force, specific ratings requirements for the insurance company and whether the policy should be in trust or payable to a trust.  Your estate planning lawyer can help to identify these issues where even a very good divorce lawyer may overlook them.

Bottom line … your divorce has real, meaningful implications for your estate plan. I know it’s not something you want to think about and yet if you don’t, you and your family could end up very, very sorry you didn’t.

Yes, the market is down.  You’ve probably lost a little money.  Maybe a lot.  You’ve heard me talking about opportunities.  Perhaps you’ve wondered what I meant by opportunities.

Today, the first of two opportunities you cannot afford to miss in this market downturn.

This one is for business owners.

Planning Opportunity #1:  Proactive personal asset protection

If you own your own business, this is the time to think about asset protection.

A few years ago, when I heard about asset protection, I poopoo’d it as something that didn’t apply to me.

First, I figured I didn’t have anything to protect and didn’t need to waste money protecting assets for the future when I needed to focus on growing those assets now.

Second, I thought it was something fear-mongering lawyers put out there to generate more business, but wasn’t really necessary.

Last, I thought it was only for the uber-rich, who were setting up shell companies in places like the Cayman Islands.

Lo and behold, was I wrong on all fronts.  And, if you think asset protection doesn’t apply to you, you’re probably wrong too.

Asset protection means taking control of what you can control - your own behavior and decisions – so you don’t end up in a place of reaction and fear due to events outside of your control.  It means proactively safe-guarding what you have acquired and what you are building for the future.   It means working with a trusted advisor to guide you during times of uncertainty.  It means making smart choices, not from a place of fear, but from a place of empowerment.

Let’s start there.

Is asset protection important even if you don’t have much?

Of course, loss hurts no matter what.   Some might say it’s even more important when you don’t have much because the impact of a loss of the little you do have is so much greater when you only have a little.

Check out this case.  This couple used an advanced asset protection strategy to protect their kids’ 529 college accounts and less than $200,000 of other assets.  And, thank goodness they did or they could have lost everything after a business deal went bad.  At least, at the end of the day, they still had what they safe-guarded.

Safe-guarded from what you might ask?

This is the part that was most surprising to me. I used to think the threat of lawsuits was mostly hyperbole pushed by over-active lawyer imaginations.  Over the past two years I’ve learned through my own personal experience that’s not the case.  As my success has grown, I’ve been threatened with more than one lawsuit.

Having an asset protection plan in place to protect my most valuable assets has allowed me to approach each of the situations calmly and without concern.

Here are a few examples:

*   When I moved into my new house, we hired a cleaning crew to prepare the house for us. One of the housekeepers was cleaning a window and fell through plastic covering           a vent left behind when our floors were refinished.  Of course, her employer                 threatened a lawsuit.

*     A former employee who was fired for theft has brought a retaliatory labor board     claim against me.  Lawsuit filed.

*     When I moved out of my former house, my landlord and I disagreed about who was responsible for the remaining time on the lease despite my having found a suitable replacement tenant they didn’t want.

Each of the circumstances that led to these unfortunate situations was and is outside of my control.  What is within my control and has contributed to my ability to calmly respond without stress instead of being forced into a place of reaction and fear is knowing my personal assets are protected.

So, how does all of this apply to you?

As a business owner, there are many things outside of your control.

What if one of your businesses is forced into bankruptcy due to the business failure of one of your key clients?  What if a disgruntled employee decides to bring a lawsuit?  What if someone gets hurt on one of your properties?  What if there is a disagreement between you and one of your partners, clients or vendors?  What if you can’t make the payments on your equipment or property lease?

Without asset protection in place, all of your personal assets could be at risk.

With proactive asset protection planning, not from a place of fear, but from a place of empowerment, you would have the peace of mind of knowing that your children’s future is safe-guarded.

During this time of uncertainty, that kind of peace of mind can be priceless.  It will allow you to make business decisions more aggressively and ultimately achieve more of the success you want.

The key is to be proactive because otherwise, the asset protection planning may not work, no matter how good it is.

If you wait until something has happened, you cannot put in place asset protection plans without violating laws against fraudulent conveyance, which prohibit you from moving assets once you are facing the threat of a lawsuit.

Here’s an asset protection action plan for you to take right now:

1. Make sure your business is properly incorporated as either an LLC or a Corporation.

2. If you are incorporated, be sure you are in compliance with all State filings, records of meetings, separate sets of books and bank accounts, and other record keeping requirements.

3. Consider advanced asset protection strategies, such as a Nevada LLC, which provides “charging order” protection, or an irrevocable trust to shield your personal assets.

Asset protection is necessary even if you are doing everything right.  In fact, I’d say it’s necessary especially if you are doing everything right because that means you’re successful.  And the more successful you are, the more important this is.

Remember, it’s not about reacting from fear, it’s about empowerment.

If you are a business owner and you are serious about doing some proactive asset protection planning, go to the Personal Family Lawyer website and request a Family Wealth Planning Session.  Use the certificate code “Asset Protection” and I’ll get you a private phone consultation with one of the top asset protection lawyers in the United States.  Please only take me up on this if you are serious about asset protection, have at least $100,000 of assets outside of your business to protect and you are willing to make the investment in proactive protection.