It’s a simple fact that your assets are always at risk. We encounter potential liabilities in our everyday life when we drive a car, invite guests to our home, post content on social media, etc. Even in cases where you have insurance, there are coverage limitations. We can be sued for almost anything and be held personally liable for our actions or failure to act. Here are a few ways to safeguard assets from liability.
1 – Buy Insurance
Your first line of defense is personal insurance, such as auto and home insurance. Both provide certain protections for your personal actions. For instance, your auto insurance covers you even if an accident is your fault. Your home insurance will typically have a personal liability clause that covers slander and other similar situations. Depending on how you use your vehicle and/or home, you may want to upgrade coverage amounts for different categories within those policies.
2 – Purchase Umbrella Insurance
For additional protection, purchase umbrella insurance. This covers any shortage in your home and auto insurance policies. For example, if you cause a car accident that results in someone’s death, their family might sue you. If damages are greater than your auto insurance coverage, your umbrella policy would cover that (but again, only up to a certain amount). Most umbrella insurance policies are inexpensive and well worth the investment.
3 – Register Business Entities
If you own a business, no matter how small or large, consider registering as a business entity such as an LLC or corporation. This separates the business from your personal finances. Anything for which the business is held liable would threaten business assets rather than personal assets.
4 – File for Homestead Protection
The state of Massachusetts has a Homestead Law that prevents creditors from forcing the sale of your home to repay a debt. Primary residences are automatically protected up to $125,000. If you file a Homestead Declaration at the Registry of Deeds, your protection increases to $500,000. If you did not file a Homestead Declaration when you purchased or refinanced your home, you can still do so. Contact your real estate attorney for assistance.
Other Ways to Safeguard Assets from Liability
These are just a few examples of ways to safeguard assets from liability. There are additional ways to protect your assets. Completing one or all of the above suggestions does not guarantee full liability protection. Everyone’s potential liabilities are different, so it’s critical that you obtain direct legal advice from an attorney regarding ways to protect you and your family, especially if you have particular concerns regarding your family’s personal or business-related activities.